US money market funds have increased their exposure to eurozone banks, in the latest sign of returning confidence in the stability of Europeâ€™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 â€œwhatever it takesâ€ to preserve the euroâ€™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 banksâ€™ funding problems. Although there was a pick-up early this year, US money market fundsâ€™ exposure fell further over the summer.
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