Interbank dollar lending rates mostly eased in Europe and Asia on Wednesday amid expectations that money markets would continue to heal into the new year, while US short-term debt rates held near zero.
Central banks have pledged further interest rate cuts and cash injections after the Federal Reserve cut its target rate close to zero on December 16 and adopted an outright quantitative easing policy to flood the banking system with easy cash.
The interbank cost of borrowing three-month dollars, euros and sterling eased on Wednesday, according to the latest daily fixing from the British Bankers' Association. But the overnight euro rate rose by 8.2 basis points to 2.20750 percent on the last day of the year.
The spread of three-month London interbank offered rates over overnight indexed swap rates for dollars and euros narrowed and was steady at 168 basis points for sterling. Rates on three-month dollar funds in Singapore fell to 1.4425 percent - their lowest since mid 2004 - from 1.4533 percent on Tuesday.
Two-year dollar swap spreads were quoted at 69.25 basis points, widening moderately from 67.5 basis points on Tuesday but still holding near their tightest level of the year. China's benchmark money market rate, the weighted average seven-day repo rate, fell to one percent from 1.2 percent on Tuesday.
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