US Money Market Funds are Returning to Euro Zone

US money market funds have increased their exposure to eurozone banks, in the latest sign of returning confidence in the stability of Europe’s monetary union.

Exposure to eurozone banks of US prime money market funds at the end of September was 16 percent higher on a dollar basis than a month earlier, according to Fitch Ratings. The third consecutive monthly rise followed a pledge in late July by Mario Draghi, European Central Bank president, to do “whatever it takes” to preserve the euro’s integrity.

The US money market funds are an important source of dollar funding for European banks. Last year, as the eurozone debt crisis escalated and fears grew of Greece exiting the bloc, the funds reduced sharply their lending to the eurozone, exacerbating banks’ funding problems. Although there was a pick-up early this year, US money market funds’ exposure fell further over the summer.

via CNBC

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