Asian stocks hit a seven-month high while the euro and commodity currencies held their ground on Wednesday on hopes a fresh cash injection by the European Central Bank will help further temper market tension and underpin risk appetite.

Profit taking capped copper but oil recovered after posting the sharpest drop in 2- months on Tuesday, while a weaker dollar supported precious metals.

The European Central Bank is expected to inject about 500 billion euros ($670 billion) into the euro zone's financial system later on Wednesday to fight the regional debt crisis. It will be the second injection since December. Banks can tap as much of the ultra-cheap, 3-year loans as they like.

The euro rose 0.2 percent to $1.3481, just a tad below a 2- month peak of $1.3487 set on Friday, and was on track to end the month up 3 percent for its best performance since October.

Given the expectation we will see a generally healthy take up in the LTRO, it should keep risk assets well supported, said Mitul Kotecha, head of global foreign exchange strategy for Credit Agricole in Hong Kong.

There is a slight risk that you might see a buy-on-rumour, sell-on-fact outcome, he added.

Asian stocks took a cue from overnight gains in the U.S., with the MSCI Asia Pacific ex-Japan <.MIAPJ0000PUS> extending early gains to rise 1.4 percent to a near seven-month high, supported by broad gains across the sectors. The index was set for a monthly gain of 4.7 percent.

Japan's Nikkei <.N225> rose 1.5 percent to a fresh seven-month high, with banks among the top performers, and was on track for its best February in two decades.

The S&P 500 <.SPX> pierced the 1,370 level to rise above its March 2011 peak on Tuesday after U.S. consumer confidence hit a one-year high in February and boosted hopes of a labour market recovery.

RISK APPETITE GAUGE

As a gauge of recovering risk appetite, commodity currencies rose, with The Australian dollar up 0.4 percent to $1.0813, nearing a six-month high of $1.0845 hit in early February.

The dollar index measured against major currencies <.DXY> was down 0.2 percent.

Spot gold hovered below a three-month high, up 0.1 percent at $1,786 an ounce, while spot silver held steady around $36.90 an ounce after surging more than 4 percent and reaching a five-month high of $37.21 in the previous session.

Copper retreated from two-week highs to stand down 0.2 percent around $8,581 a tonne.

U.S. crude oil futures were up 0.3 percent to $106.88 a barrel, while Brent crude inched up 0.5 percent to $122.19 a barrel.

The biggest driver behind the swings in precious metals prices is the change in the dollar's relative value against other currencies, said Naohiro Niimura, a partner at research and consulting firm Market Risk Advisory Co.

Base metals have been driven higher primarily by speculators, so pressures to take profits at the highs are strong, capping the upside.

The drop in oil prices helped ease concerns that rising energy costs, fed by tensions over Iran's nuclear program and other supply-related issues in the Middle East, would hurt the global economy.

Following the ECB's cash injection, market attention will turn to U.S. Federal Reserve Chairman Ben Bernanke's semi-annual testimony on monetary policy before the House Financial Services Committee due at 1500 GMT. ($1 = 0.7450 euros)

(Additional reporting by Vikram Subhedar in Hong Kong and Masayuki Kitano in Singapore; Editing by Michael Perry)