* Euro rises 0.5 percent as equities open higher * Short-covering seen lending support but outlook dim * Analysts: ECB liquidity tender does not solve debt crisis By Nia Williams LONDON, Dec 22 (Reuters) - The euro rose against the dollar on Thursday drawing support from higher European stocks, although the rally was seen limited by ongoing concerns the euro zone debt crisis could intensify next year. Analysts said the European Central Bank's first ever tender of ultra-cheap three-year loans on Wednesday was not giving much support to the single currency. Doubts remained over how much of the funds will be lent on to boost the ailing euro zone economy or peripheral sovereign bond markets, given banks are deleveraging and cutting back exposure to government debt. Market players said the euro would struggle to make much headway given the likelihood of further pressure on sovereign bond markets in 2012, although it may gain support from short-covering amid thin end-of-year liquidity. The euro rose 0.5 percent to a session high of $1.3120, holding above an 11-month low of $1.2945 hit last week on trading platform EBS. "We are seeing a little bit of short-covering and equity markets are in positive territory opening up. There is a little bit of risk appetite this morning," said Niels Christensen, FX strategist at Nordea. IMM data released last Friday showed net short positions in the euro against the dollar rose sharply as of Dec. 13, following a disappointing EU summit. Nordea's Christensen said the hefty short euro positioning meant market players were reluctant to add to those bearish bets at the current level, slowing the euro's downward momentum. A total of 523 banks borrowed nearly 490 billion euros in loans from the ECB, but analysts were sceptical about whether the liquidity could alleviate funding tensions for some euro zone sovereigns. "In the longer-term the liquidity provided yesterday is not going to solve the debt crisis, it is not going to help southern European countries with their problems in getting control of their public debt," said Christensen. There was also little evidence so far that the banks would be keen to use the funds to buy Italian and Spanish debt, as French President Nicholas Sarkozy has urged, and help pull the borrowing costs of those countries lower. Banks would be able to borrow three-year debt from the ECB at 1 percent and invest in Spanish or Italian bonds at around 5 or 7 percent, but may prefer to use the funds to shore up their own balance sheets. 2012 DEBT AUCTIONS EYED Euro zone bond markets are expected to come under fresh pressure with some 230 billion euros of bank bonds, up to 300 billion in government bonds, and more than 200 billion euros in collateralised debt all maturing in the first quarter of 2012. "With the tender out of the way, we are turning to the hurdles waiting for the euro next year -- potential sovereign credit rating cuts, more stress in dollar funding and possibly recession in Europe," said Masahide Sato, vice president at Mizuho Corporate Bank's forex division in Tokyo. "In this environment the euro is poised to fall further. But we all know that -- the difficulty here is to stay ahead of the curve and dodge all the short-covering rallies -- especially with the market so massively short euro," Sato said. As the euro rallied the dollar index slid 0.3 percent to 79.736, holding near last week's 11-month peak of 80.73. The greenback stayed tethered in range against the yen, last fetching 78.05. It has been tied to a roughly 2-yen-wide band since Tokyo stepped into the market to stem its currency's strength on Oct. 31. The Australian dollar picked up as risk appetite improved in the European session. It rose 0.4 percent to US$1.0124, after finding decent support at its 21-day moving average of $1.0060. The UK will release GDP data later on Thursday with economists expecting 0.5 percent growth in the third quarter. Market participants will also be looking at U.S. GDP data, forecast to show 2.0 percent growth.

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