* Euro falls, traders say LTRO result priced in
* Commodity currencies rally as carry trades eyed
* ECB balance sheet expansion seen as euro negative
By Nia Williams
LONDON, Feb 29 (Reuters) - The euro dipped against the dollar in choppy trade on Wednesday after the European Central Bank injected a huge amount of three-year cash into the banking system, giving a boost to higher-yielding currencies which rose to multi-month highs.
The Australian and New Zealand dollars rose against the U.S. dollar, and also made gains against the euro. The excess liquidity was seen likely to boost carry trades in which investors use lower-yielding currencies buy riskier assets, which would weigh on the euro.
The 530 billion euros alloted was slightly more than the half a trillion euros forecast and bigger than the previous long term refinancing operation (LTRO) in December, when the euro briefly rallied nearly 1 percent on the day before reversing gains.
Traders said the result was in line with expectations and had been more or less priced in, which meant the euro's scope for gains against the dollar was limited.
The euro was last down 0.3 percent at a session low of $1.3425, off a three-month peak of $1.34869 hit last week on trading platform EBS.
"We came into this in a risk-on mood and the fact it was line should allow most of the risk-on trades to resume their climb," said Daragh Maher, FX strategist at HSBC.
The growth-correlated Australian dollar rose to a seven-month high of US$1.0857, while the New Zealand dollar climbed to a six-month high of US$0.8452.
"There's more money to pour into Australia, but the result was almost entirely baked in (for the euro)," said a spot trader in an Australian bank.
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.
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.