SYDNEY/SINGAPORE - CENTRAL banks across Asia scrambled on Friday to meet a desperate demand for cash, both in their own currencies and the US dollar, as the White House's US$700 billion (S$995 billion) bailout plan ran into unexpected roadblocks.

News of the biggest ever US bank failure only added to the thirst for liquidity, with the government brokering a last-ditch purchase of thrift Washington Mutual by JPMorgan.

'The market is just frozen at the moment,' said Mr Claudio Piron, a strategist at JPMorgan Chase Bank in Singapore.

'We are at such a point of absent liquidity that prices are beginning to fail in their usefulness as a signal - this in itself is disturbing,' Mr Piron said.

Overnight dollar funds remained in a broad 2.5-3.5 per cent range in Asia, bankers in Singapore said. Short-term lending rates in local currencies jumped with Singapore dollar overnight rates at 2 per cent, their highest since end January.

Unease intensified after House Republicans balked at Treasury Secretary Henry Paulson's plan to buy bad debt from banks and instead floated an idea of their own for mortgage insurance, casting the whole bailout into doubt.

With commercial banks everywhere hoarding cash and reluctant to lend to each other, central banks were increasingly stepping in to fill the void.

The Reserve Bank of Australia (RBA) launched its first ever repurchase operation in US dollars and all US$10 billion on offer was hungrily snapped up at 3.165 per cent, well above the minimum bid rate of 2.35 per cent.

The RBA established a US dollar swap line with the Federal Reserve earlier in the week, aimed at meeting strong demand for US dollars during Asian trading hours.

In South Korea, the Finance Ministry said it would inject US$10 billion or more into the local swap market until the middle of October to stave off persistent dollar funding shortages.

The RBA and the Bank of Japan also kept adding extra cash to their own banking systems on Friday, while Vietnam lifted the rate it pays on bank reserves to reduce the cost of borrowing.

Yet these sums paled into insignificance compared to the US Federal Reserve's largesse.

Figures released on late Thursday showed US institutions borrowed from the Fed US$188 billion per day on average in the latest week, almost four times the previous record.

'This looks like the balance sheet of a central bank that is keeping the financial system on life support,' said Mr Michael Feroli, US economist with JPMorgan in New York. -- REUTERS