(Reuters) - The euro traded close to a three-month high against the dollar on Wednesday ahead of an injection of cheap long-term funds from the European Central Bank that was expected to boost risk appetite and fuel short-term gains in the single currency. European banks are expected to snap up around half a trillion euros of three-year loans at the ECB's second long-term refinancing operation (LTRO), according to a Reuters poll of money market traders. That amount would be similar to the take-up for the last LTRO in December, although forecasts ranged from 200 billion to 750 billion euros. The euro was last down 0.1 percent on the day at $1.3458, holding near a three-month peak of $1.3486 hit last week on trading platform EBS. Analysts said a larger-than-expected liquidity injection would be seen as a bigger incentive for investors to buy perceived riskier assets including the euro, but the single currency's gains could be short-lived. With much of the LTRO effect already priced in, many traders said they would be looking to sell into any euro rally. Reported offers started above $1.3520, near the 100-week moving average, and were seen at regular intervals up to $1.3620, traders said. Strong technical resistance was seen around the 200-day moving average at $1.3720. "A stronger number means that most people would think there is plenty of money to go into risky assets and that should be very positive for the euro and other risky currencies," said Ulrich Leuchtmann, head of FX research at Commerzbank, who expected a take-up around 500 billion euros. "But I don't think the reaction will go very far. We may see a spike up but I do not think it will be followed by a long-term run higher in the euro." The growth-correlated Australian dollar rose 0.3 percent to US$1.0816, while the New Zealand dollar climbed 0.6 percent to US$0.8429, with commodity currencies seen likely to track moves in the euro. Leuchtmann said a smaller-than-forecast take-up by banks may prompt investors to cut long positions in riskier currencies, but the effect was unlikely to be as extreme as if the LTRO surprised to the upside. The ECB money is seen as helping to ease bank funding strains and could underpin the region's sovereign bond market. But many analysts said the LTRO was merely buying time rather than solving the euro zone debt crisis, and warned excess liquidity could weigh on the single currency in coming months. "Beyond that positive knee-jerk reaction...we continue to believe that the LTRO will weaken the euro via the easier monetary policy channel," wrote Barclays Capital analysts. Euro zone policymakers tackling the region's debt crisis also face an Irish referendum on the European Union's new fiscal treaty. A 'no' vote would damage long-term funding prospects for Ireland and create more uncertainty. YEN PRESSURED The worst performing currency in February was the yen, which is set to post its biggest fall in 11 years against the euro and in over two years against the greenback. The Japanese currency has come under broad pressure since the Bank of Japan's surprise policy easing earlier in the month, triggering a break of key support levels in the yen. The dollar rose 0.1 percent against the yen to 80.52 yen, with support on the daily Ichimoku chart at 80.23 yen. Meanwhile, the euro climbed 0.1 percent against the yen to 108.40 yen. In addition to the outcome of the ECB's cash injection, another focal point on Wednesday is U.S. Federal Reserve Chairman Ben Bernanke's semi-annual testimony on monetary policy before the House Financial Services Committee. Investors will look for signs the central bank plans to stick to its pledge to keep interest rates low for an extended period of time.

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