FRANKFURT - THE European Central Bank set at roughly 400 billion euros (S$783.9 billion) the amount of euros and dollars it will pump into eurozone money markets in coming days to get cash flowing though the critical but clogged system, in a statement on Tuesday.

The ECB will provide more than 305 billion euros in one-week loans to banks at a fixed rate of 3.75 per cent in a regular operation which begins on Wednesday and allows them to meet minimum reserve requirements.

A high total of 703 banks had requested the funds, which serve as reserves to back up loans made to businesses and individuals, the ECB said.

A separate currency swap of dollars for euros that would run for 28 days from Thursday as well would add another 22.605 billion dollars, a statement said.

The ECB said it would charge a flat rate of 8.6 swap points, or 0.00086 dollars per euro for the second dollar transaction, which allows commercial banks to borrow dollars for just under a month by offering euros in return.

Eurozone banks need foreign currencies such as dollars and Swiss francs to finance lending, but the markets on which they trade froze up owing to mistrust that was fueled by and fed back into the international financial crisis.

Central banks have focused on getting the markets running again by injecting massive amounts of the world's major currencies to prime interbank lending, and appear to be achieving some success.

The money 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 mortgages and personal loans.

UBS economist Stephane Deo said on Tuesday that 'the money markets, although far from operating normally, are trending in the right direction'.

'Of particular interest, we find that interest rates are moving gradually to a more reasonable level,' he added. -- AFP