By Nia Williams LONDON, Dec 22 (Reuters) - The euro pared gains against the dollar on Thursday in choppy year-end conditions with ongoing concerns that the euro zone debt crisis could intensify next year driving investors to sell into any rebounds in the single currency. 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 euro. Doubts remained over how much of the funds will be lent on to boost the ailing euro zone economy or peripheral sovereign bond markets as banks deleverage and cut back exposure to government debt. Market players said the looming threat of euro zone sovereign downgrades was also keeping investors on edge. The euro gained some support from short-covering amid thin end-of-year liquidity. But it gave up most of those gains on steady selling by an Asian central bank and macro funds. Their selling saw the euro drop towards session lows of $1.3033 before inching up to last trade at $1.3057. It held above an 11-month low of $1.2945 struck last week on trading platform EBS and traders cited stop loss orders below $1.3030. "This crisis is not even near to being resolved. I think when we see markets reopening in a meaningful way in January we will see more pressure on Italian and Spanish bonds and more pressure on the euro," said Ulrich Leuchtmann, head of FX research at Commerzbank. "I do not see many arguments for trading euro/dollar higher today," he added, forecasting the euro to dip to $1.25 in 2012. Leuchtmann said large speculative short positions in the single currency against the dollar were slowing its downward momentum, with many investors looking to square those positions ahead of the holiday period. 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. 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 Niels Christensen, FX strategist at Nordea. 2012 DEBT AUCTIONS EYED 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. 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. The dollar index dipped 0.1 percent to 79.950, holding near last week's 11-month peak of 80.73, while the greenback stayed tethered in range against the yen, last fetching 78.10. 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 stocks rose in the European session. It climbed 0.4 percent to US$1.0127, after finding decent support at its 21-day moving average of $1.0060. Sterling showed little reaction to better-than-expected UK GDP data that showed the economy grew up 0.6 percent in the third quarter of 2011. Market participants will also be looking at U.S. GDP data, forecast to show 2.0 percent growth.

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