THE cost of dollar deposits stayed high in Asia on Monday as the nervousness in interbank lending persisted even after heavy cash injections by major central banks and last week's joint round of rate cuts.

US dollar deposit markets were ill-liquid and volumes low in Asia on Monday on account of a US holiday.

Traders said the few transactions taking place were for tom-next funds, where banks borrow for a day from Tuesday to Wednesday.

'Most people are on the sidelines. Tom-next range is between 4 and 6 per cent but most trades are between 4-4.5,' said a trader in Singapore.

A trader in Jakarta said tom-next dollar funds were easier, at around 3.5 per cent.

Overnight dollar cost between 4 and 7 per cent in Asia on Friday, far above the Federal Reserve's 1.5 per cent target.

In London, interbank dollar overnight rates were indicated at 4 per cent but later fixed at near 2.47 per cent on Friday.

US federal funds traded at 1 per cent in New York on Friday.

Central banks will have to guarantee interbank lending if the volatility in dollar funding is to end, some traders said.

The cost of dollar overnight funding had risen as far as 10 per cent during this financial crisis, after the collapse of Lehman Brothers sparked a fresh bout of extreme risk aversion and volatility. -- THOMSON REUTERS