- The dollar extended losses against the yen on Wednesday, after the Bank of Japan trimmed the size of its bond purchases in the prior session, sparking speculation that it could start to scale back its monetary stimulus later this year.

USD/JPY was down 0.64% at 111.94 by 02:58 AM ET (07:58 AM GMT) from a low of 111.77 earlier, which was the weakest level since December 1.

The yen spiked after the BoJ tweaked the size of its bond-repurchase offer in its latest market operation on Tuesday, reminding investors that it will eventually normalize monetary policy.

The Japanese currency was also higher against the euro, with EUR/JPY down 0.63% to 133.62.

The euro was hovering near one-and-a-half week lows against the dollar, with EUR/USD at 1.1939 after losing around 0.33% on Monday.

The euro has weakened in recent sessions as investors took profits after its rally at the start of the year amid concerns that the European Central Bank may attempt to talk down the strengthening currency ahead of its monetary policy meeting later this month.

After getting off to a strong start to the year the single currency had hit a four-month high of 1.2088 on Thursday, putting it within striking distance of a September peak of 1.2092, its strongest level since early 2015.

The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, slid 0.1% to 92.14 from Tuesday’s one-week high of 92.36.

Demand for the dollar continued to be underpinned by expectations for further interest rates hikes by the Federal Reserve this year after Friday’s U.S. jobs report did little to alter the outlook for monetary tightening.

While the rate of jobs growth cooled in December a pick-up in wage growth pointed to strength in the labor market.

Sterling slid lower against the dollar, with GBP/USD losing 0.21% to trade at 1.3510.

The Australian dollar was little changed, with AUD/USD at 0.7824 while the New Zealand dollar pushed higher, with NZD/USD rising 0.22% to 0.7178.