FRANKFURT - THE European Central Bank said Wednesday it would pump 70 billion dollars (S$102.9 billion) back into interbank money markets in one-day loans, raising the amount by 20 billion dollars.

The operation has become a daily event aimed at keeping cash flowing through the key financial pipeline, and the increased sum underscored persistent pressure in the eurozone markets.

Demand for the US currency was strong, the bank said later, with 69 banks asking for a total of more than 122 billion dollars, and paying a stiff 11.6 per cent on average for the cash that was available.

By raising the amount of dollars it lends every day to eurozone banks, the ECB appeared to be taking another step in a global effort to deal with extreme tension on the crucial financial markets.

Those markets determine the availability of credit for vast numbers of people around the globe, from managers trying to fund their businesses to families and students seeking personal loans.

Commercial banks generally lend and borrow cash from each other on interbank markets but these have dried up since the US market for high-risk, or subprime, mortgages collapsed more than a year ago.

The ECB and other major central banks have been providing huge amounts of cash via loans to try and ease turmoil stemming from the latest crisis in the US financial sector, and have become essentially the sole source of liquidity for commercial banks. -- AFP