By William Launder Of DOW JONES NEWSWIRES FRANKFURT (Dow Jones)--Demand for the European Central Bank's dollar swap facility rose sharply Wednesday, suggesting the stigma attached to borrowing dollars from the institution may be fading as the funds become cheaper for euro-zone banks. The ECB said it allotted $33 billion at a two-week dollar swap operation, up from $5.122 billion allotted at a seven-day tender last week. A total of 34 banks made bids for dollar liquidity at a fixed rate of 0.57%, compared with 12 bids made for dollars at the seven-day operation last week. Separately Wednesday, the ECB said it allotted EUR489.19 billion in the first of two keenly awaited three-year refinancing operations, fueling hopes that banks would use the funds to support distressed euro-zone sovereign debt markets through bond buying. The debt crisis has eroded market trust in many euro-zone banks, which face increasing difficulty in accessing funds, including the dollar loans they need for daily transactions like managing dollar-denominated investments. Euro-zone banks have until recently been reluctant to use the ECB's dollar swap facilities, out of fear that using them would be taken by markets as a sign of financial weakness. The ECB never publishes the name of bidders, but they are often identified or speculated about independently by market participants. Last month, the world's major central banks moved in concert to provide cheap, emergency U.S. dollar loans to banks in Europe and elsewhere, aimed at addressing the dollar shortage and broader stresses in Europe and the global financial system. -By William Launder, Dow Jones Newswires; +49(0)6929725515 ; william.launder@dowjones.com

Source