* Euro could gain if ECB remains hawkish, Fed dovish
* Some say risk of more profit-taking in euro
* Breakdown in yen-US yields link hints changing money flows
By Hideyuki Sano
TOKYO, Feb 3 (Reuters) - The euro paused below a 12-week peak on Thursday, though hawkish comments from the European Central Bank later in the day could give it fresh impetus to test resistance around $1.3950.
The euro could gain even more if Federal Reserve Chairman Ben Bernanke, who is due to speak only a few hours after ECB chief Jean-Claude Trichet, reaffirms the bank's policy is still focusing on boosting growth.
The euro traded at $1.3798 EUR=, having slipped on profit-taking after it marked a 12-week high of $1.3862 on Wednesday, though it is more than 7 percent above a four-month trough of $1.2860 hit less than a month ago.
The euro moved little in Asia on Thursday, with many Asian players away for the Lunar New Year holidays and as traders looked to Trichet's news conference at 1330 GMT.
"I think the market expects the ECB to be hawkish. But as the euro has already risen quite a lot, market players are cautious about chasing it higher," said Tsutomo Soma, a manager of foreign bonds at Okasan Securities.
Some market players suspect the market's expectations of hawkish rhetoric from Trichet has built up so much that there is room for disappointment, posing downside risk for the single currency.
Similar risk also exists for the speech from the Fed chief, due at 1730 GMT, if he turns out to be less dovish than many market players have hoped.
Still, Fed Governor Elizabeth Duke said late on Wednesday that although she does not think the U.S. central bank will have to extend its $600 billion bond-buying programme beyond midyear, economic weakness could force the Fed's hand.
Many market players do not expect the speeches from the world's two most influential central banks to change the perception that the ECB will be way ahead in raising interest rates to curb inflation.
That should keep euro zone interest rates much higher than dollar rates, and help the euro test resistance around $1.3950, where it has a 76.4 percent retracement of its two-month decline to early January as well as its 200-week moving average.
In addition, worries on the euro zone's debt problems are falling off many market players' radars as yields on Spanish and Italian government bonds fell sharply to two-month lows.
Although the euro dipped slightly on news that supporters of Egyptian President Hosni Mubarak opened fire on protesters in Cairo, the impact was limited.
