MONEY MARKETS-Yen Libor falls subsequent dollar ECB subsequent concentration

Thu Mar 4, 2010 8:11am EST Related News U.S. shares rise on data; euro falls on ECB outlookThu, Mar 4 2010EURO GOVT-Greek spread reverses widening on good bond demandThu, Mar 4 2010MONEY MARKETS-U.S. rate spreads post record tightsWed, Mar 3 2010MONEY MARKETS-U.S. rates futures firm, gains seen limitedTue, Mar 2 2010MONEY MARKETS-Euro Libor down ahead of ECB, Australian jumpsTue, Mar 2 2010

* 3-month yen Libor dips below dollar first time since Aug * Next focus ECB"s possible liquidity operation changes By George Matlock LONDON, March 4 (Reuters) - The interbank cost of borrowingthree-month dollar funds edged higher on Thursday while for yenfunds it fell, taking the Japanese currency rate below that ofthe greenback for the first time since August. Yen Libor has historically been below dollar Libor and thecrossover may suggest a normalisation in money markets. Yen Libor JPY3MFSR= was at 0.25063 percent -- its lowestsince May 2006 -- and the dollar USD3MFSR= rate at 0.25219percent, leaving three-month Swiss franc Libor CHF3MFSR= at0.24833 percent the cheapest among major currencies, accordingto the latest fixings by the British Bankers" Association inLondon. [ID:nEAP000023] While the three-month dollar Libor has held a tight rangesince hitting a record low of 0.24.875 percent on Dec. 21, theyen rate has gradually fallen. "Evidently, the yen is trending lower while the dollar ratejust hovers around 25 basis points waiting for the day theFederal Reserve will tighten," said Peter Chatwell, a marketanalyst at Credit Agricole CIB in London. "Our U.S. economist is forecasting a Fed rate hike in thefirst half of 2011." TRICHET UP NEXT The reversal of three-month dollar and yen Libor provided adistraction to markets ahead of a news conference from theEuropean Central Bank which may see the valve on liquidity tocredit markets begin to be tightened. ECB President Jean-ClaudeTrichet is due to speak at 1330 GMT. Greece said it would raise 5 billion euros from the sale ofits new bond. [ID:nLDE6230XS] The ECB left its key policy rate on hold at a record low 1.0percent and was expected to detail the next steps in its gradualwithdrawal from emergency lending [ID:nLDE622279]. These could include a switch back to variable rate auctions,fixed sum 3-month money operations, shortening outstandingmaturities as commercial banks take more cash in flat-rateweekly operations. However, faced with sluggish growth and concerns overGreece, some analysts say the central bank may have to hold offsuch moves for a little while yet. "If the ECB reforms its liquidity provisions on the lines weare hearing it will be a tightening of the valve on liquiditywhich so far is not fully priced in," said a money marketsdealer.

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