Swap rates in India remained at 21-month highs, supported by expectations that monetary policy will remain tight to bring down double-digit inflation.

In Singapore, interbank lending rates for 3-month dollars fell to a 10-week low of 0.47972 percent from 0.48556 percent after London interbank offered rates (LIBOR) for 3-month dollars eased a basis point to 0.46563 percent.

The dollar rate has fallen nearly 3 basis points this week alone out of an aggregate of 6 bps for July.

“The fall has accelerated. Momentum might take LIBOR to 40 bps by the end of August,” said a Singapore-based trader.

“The optimism is due to European problems out of the way, but any scare, and we will run again to the 0.55 level.”

Overnight, data for July showed a jump in euro zone economic sentiment to a 28-month high and a decline in German unemployment.

In India, the one-year benchmark overnight indexed swaps stayed at a 21-month high of 6.25 percent, even as call money rates eased from recent highs as the reporting fortnight came to a close.

“The market is surely factoring in more hikes and the expectations of liquidity returning to positive is fast disappearing,” said R.K. Gurumurthy, head of treasury at ING Vysya Bank, Mumbai.

On Tuesday, the RBI raised the repo rate, at which it lends to banks, by 25 bps to 5.75 percent, matching forecasts.

But it bumped up the reverse repo rate, used to absorb excess cash, by 50 bps — twice as much as markets had expected — to 4.50 percent.

Most economists in a Reuters poll after Tuesday’s review expected the repo rate to reach 6.5 percent by the end of the fiscal year in March, with the reverse repo rate reaching 5.25 percent in the same period, above earlier forecasts.

Financial markets are less hopeful about liquidity strains easing in the near-term after a central bank official said cash was being injected into the system at a rate lower than inflation and that could sustain pricing pressures.

“You are injecting liquidity at 5 percent and inflation is at 10 percent. They will never be able to control inflation, everything else remaining the same,” the official, who declined to be identified, told reporters on Thursday.

“Monetary policy has to be aggressive,” the official said.

China’s benchmark weighted average seven-day government bond repurchase rate fell to 1.6733 percent — a 3-month low — from 1.6773 percent on Thursday.