* Dollar sags as Republican senators seek tax bill changes
* Euro also on defensive after mixed messages from ECB
* Kiwi up, NZ finmin says “comfortable” with currency’s trend (Adds details and quotes, updates prices)
By Shinichi Saoshiro
TOKYO, Dec 15 (Reuters) - The dollar was on the defensive on Friday after wrangling over a bill to change the U.S. tax code dented confidence, while the euro sagged after the European Central Bank signalled it would maintain stimulus for as long as needed.
The greenback was off 0.2 percent at 112.170 yen, having dropped to an eight-day low of 112.065 overnight.
The U.S. currency had climbed to a one-month high of 113.750 yen on Tuesday. But it made a U-turn midweek after the Federal Reserve tightened monetary policy as expected but also expressed concern about low inflation.
The dollar lost further ground after two U.S. Republican senators on Thursday were reported to have sought changes to the proposed legislation to overhaul the U.S. tax code.
The tax bill needs a simple majority to pass in the Senate, in which Republicans hold just 52 of the 100 seats and no Democrats are expected to support it.
“Negotiations tend to last until the last minute in these kind of situations. So it is not surprising, especially as those seeking changes to the bill were likely emboldened by the Republican’s defeat at Alabama,” said Shin Kadota, senior strategist at Barclays in Tokyo.
Democrat Doug Jones won the contest for a U.S. senate seat on Tuesday in Alabama, a Republican stronghold, and trimmed their already narrow Senate majority.
“The overall process of overhauling the tax bill is not in peril. That said, even if the tax bill is passed and becomes law, the positive impact on the dollar could be limited as the market has already priced in such a scenario for the most part,” Kadota at Barclays said.
Negotiators from both the Senate and House of Representatives have been scrambling to reconcile their own versions of the tax bill in recent days. Once a compromise is reached, it will be sent to U.S. President Donald Trump to be signed into law.
“There are suggestions that the economic impact of tax cuts won’t be that strong. But what is important is that an element of uncertainty, which the market dislikes, will be finally removed if the bill turns into law,” said Yukio Ishizuki, senior currency strategist at Daiwa Securities.
The euro was little changed at $1.1787 after losing about 0.4 percent overnight.
The common currency flagged after the European Central Bank on Thursday raised growth and inflation forecasts for the euro area, but stuck with its pledge to provide stimulus for as long as needed.
With the euro on the back foot, the dollar index against a basket of six major currencies steadied at 93.523, having pulled away from an eight-day low of 93.282 set overnight. It was headed for a weekly loss of 0.3 percent.
The pound inched up 0.1 percent to $1.3442. It had slipped from a near one-week high of $1.3467 the previous day, as markets were disappointed when the Bank of England stuck to its view that interest rates were likely to rise only gradually despite above-target inflation and progress in Brexit talks.
Sterling, however, remained clear of a two-week low of $1.3303 plumbed on Tuesday and was headed for a 0.4 percent gain on the week.
The Australian dollar was a shade higher at $0.7672 and within touching distance of a five-week high of $0.7680 set on Thursday after an upbeat domestic employment report.
The New Zealand dollar was up 0.2 percent at $0.6997 after the country’s finance minister Grant Robertson said he was comfortable with the currency’s general trend.
The kiwi slumped to a 17-month low of $0.6781 in mid-November following a change of government. It bounced back above $0.7000 earlier this week to touch a near two-month peak after the appointment of a well-regarded ex-central banker as the new chief of the Reserve Bank of New Zealand. (Reporting by Shinichi Saoshiro; Editing by Shri Navaratnam)