The European Central Bank (ECB) has added funds to the money market, but dealers said lingering effects from a cash shortage may cause market rates to fall only gradually into next week.
Dealers quoted euro overnight rates in the 3.40-3.45 per cent range, down from 3.80-3.85 per cent in early trade, but still well above the ECB's 3.25 per cent minimum bid rate, despite a euro 50 billion net cash injection at the ECB's weekly tender.
Banks have been short of cash since cutting their bids in last week's ECB auction in a bet that the central bank was about to cut official interest rates.
The ECB's governing council did cut rates by 50 basis points to 3.25 per cent on November 8th, but banks' underbidding behaviour still left the market short of cash.