By Patricia Lui June 1 (Bloomberg) -- The interest rate banks pay for three-month dollar loans rose toward an 11-month high in Asia on speculation investors are holding onto the greenback to guard against a repeat of the 2008 credit-market crisis. Funding costs climbed as China and Taiwan reported manufacturing slowed in May, fueling concern that Europe’s spending cuts and recent Chinese policy tightening will cool demand for Asian goods. The European Commission said yesterday its gauge of executive and consumer sentiment in the 16 nations sharing the euro fell last month even after a $1 trillion aid package was pledged to help countries tackle budget deficits and meet debt obligations. “Dollar funding is a function of what’s happening in global risk and given what’s happening in equities I expect dollar funds to continue higher,” said Tim Condon, Singapore- based chief Asia economist for ING Groep NV. “A couple of indicators that growth is falling short is screaming hard- landing for some people and they are heading for the hills.” The Singapore three-month interbank rate for U.S. dollars, or Sibor, rose to 0.542 percent, according to the 11:30 a.m. fixing by the Association of Banks in Singapore. The measure fell yesterday for the first time in 13 days, dropping to 0.541 percent. It reached 0.547 percent on May 27, the highest level since July 8, 2009. Dollar Strengthens The London interbank offered rate, or Libor, for three- month dollar loans slipped to 0.536 percent on May 28, having the previous day stayed at a 10-month high of 0.538 percent, according to data from the British Bankers’ Association. That was the first decline since May 10. U.S. and U.K. markets were closed yesterday for holidays. China’s Purchasing Managers’ Index fell to 53.9 from 55.7 in April on a seasonally adjusted basis, the Federation of Logistics and Purchasing said today, below than the median 54.5 estimate in a Bloomberg News survey. Taiwan’s HSBC Manufacturing Purchasing Managers’ Index slid to 57.4 from 60.7 in April, according to Markit. The MSCI Asia-Pacific Index of regional stocks dropped, halting four days of gains. The dollar strengthened against 12 of the world’s 16 most-active currencies. The European Central Bank warned yesterday of more bank losses as the region’s credit crisis spreads. Fitch Ratings on May 28 stripped Spain of its AAA credit grade, saying the nation’s debt burden is likely to weigh on economic growth.

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