The interbank cost of borrowing dollars has continued to fall today, indicating that the pressure on the money markets may be easing.

The three-month Libor rate for interbank borrowing in dollars has fallen 0.225 per cent today to 3.83375 per cent. This follows a fall of 0.36 per cent yesterday, the sharpest one-day drop for nine months. The overnight dollar rate was down 0.23125 per cent, to 1.28125 per cent.

Three-month sterling Libor, the measure used to price mortgages, eased slightly by 0.03125 per cent to to 6.085, though this remains well above the UK base interest rate of 4.75 per cent. After rising slightly yesterday, the overnight sterling rate was down again today, at 4.75 per cent.

The cost of borrowing euros also dropped back. The three-month rate slipped 0.0275 per cent to 4.95875 per cent, and the overnight rate was 3.555 per cent. Stock markets were reassured by wprds from Ben Bernanke, chairman of the US Federal Reserve.

Mr Bernanke said he backed fresh "fiscal stimulus", lending weight to hopes that tax cuts and extra public spending could soon be announced in Washington.

On Wall Street the Dow Jones closed up 4.67 per cent, at 9,265.43. The FTSE 100 gained 5.4 per cent yesterday, and was trading up at 4,291.37 this afternoon.

The Bank of England is continuing to release dollars into the money markets in a co-ordinated effort, announced earlier this month with the ECB and the Swiss central bank, to restore confidence.

This morning, the Bank made $10 billion available to in its daily dollar operations, of which $6.12 billion was taken up. It also released $25.97 billion dollars today in its 28-day unlimited tender, and tomorrow it will make unlimited funds available in its weekly operation.

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