* Dollar eases vs yen after setting 1-week high on Wednesday
* Rise in U.S. 10-year bond yields supports dollar vs yen
* Euro underpinned by rise in German bond yields
* BOJ policy decision due later on Thursday
By Masayuki Kitano
SINGAPORE, Dec 21 (Reuters) - The dollar held near a one-week high against the yen on Thursday, supported by a rise in U.S. bond yields, with moves limited ahead of a Bank of Japan policy decision and a news conference by the BOJ governor.
The dollar eased 0.1 percent to 113.28 yen, after rising to as high as 113.47 yen on Wednesday, its strongest level since mid-December.
A rise beyond last week’s high of 113.75 yen would send the dollar to its highest level in more than a month.
Analysts said the dollar was supported against the yen after the U.S. 10-year Treasury yield rose to a nine-month high on Wednesday as investors worried over whether the tax cuts would lead to higher U.S. debt, increased bond issuance, and more aggressive rate hikes by the Fed.
The Republican-controlled U.S. House of Representatives gave final approval on Wednesday to the biggest overhaul of the U.S. tax code in 30 years, sending a sweeping $1.5 trillion bill to President Donald Trump for his signature.
A rise in German bond yields helped underpin the euro, which held steady at $1.1873, having risen more than 1 percent so far this week.
Against the yen, the euro last traded at 134.48 yen . On Wednesday, the euro had risen to as high as 134.76 yen, its strongest level against the yen since October 2015.
The Bank of Japan is widely expected to keep its short-term interest rate target at minus 0.1 percent at its policy decision due out later on Thursday and pledge to guide 10-year bond yields around zero percent.
Market players, however, are looking to a post-meeting news conference by BOJ Governor Haruhiko Kuroda, for clues on whether the central bank is getting closer to joining the U.S. Federal Reserve and European central banks in winding back stimulus.
A speech by Kuroda in November sparked such speculation when he mentioned the concept of a ‘reversal rate’ - a level at which low interest rates start to have more harmful side-effects than benefits.
If Kuroda’s comments are interpreted as sounding hawkish the dollar might come under pressure against the yen, said Stephen Innes head of trading in Asia-Pacific for Oanda in Singapore.
“If he maintains the dovish narrative, which we’re all expecting, maybe we get a little bounce higher on dollar/yen,” Innes said, adding however, that he wasn’t expecting Kuroda’s comments to trigger any aggressive moves. (Reporting by Masayuki Kitano; Editing by Eric Meijer)