* Dollar sags as Republican senators seek tax bill changes
* Euro also on defensive after mixed messages from ECB
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 0.1 percent at 112.315 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.
The euro was little changed at $1.1780 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 nudged up 0.1 percent to 93.602 and 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 was effectively flat at $1.3437. 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 steady at $0.7668 and in close reach of a five-week high of $0.7680 set on Thursday on a robust domestic employment report. (Reporting by Shinichi Saoshiro; Editing by Shri Navaratnam)