The European Central Bank said it will lend dollars to two euro-area banks tomorrow, a sign they are finding it difficult to borrow the greenback in markets. The ECB allotted $575 million in a regular seven-day liquidity-providing operation at a fixed rate of 1.1 percent. It’s the first time since Aug. 17 that a lender requested dollars from the ECB. The spot rate was $1.3625. The premium European banks pay to borrow in dollars through the swaps market is close to the highest level in almost three years. The cost of converting euro-based payments into dollars, as measured by the one-year cross-currency basis swap, was 98.5 basis points below the euro interbank offered rate, or Euribor, at 10:06 a.m. in Frankfurt, indicating a premium to buy the greenback. It widened to as much as 112.6 basis points earlier this week, the most since Dec. 2, 2008, according to data compiled by Bloomberg. “U.S. money markets have stopped rolling over dollar loans of European banks,” said Stephen Gallo, head of market analysis at Schneider Foreign Exchange in London. “I wouldn’t be surprised if demand increased in the next weeks.” BNP Paribas SA’s cost of borrowing in dollars has risen in the past four weeks amid concern U.S. money market funds are shutting off lending to France’s banks because of their holdings of Greek government debt. BNP Paribas yesterday said it is able to finance its dollar needs at normal levels “directly and through foreign-exchange swaps.” Societe Generale SA Chief Executive Officer Frederic Oudea said in an interview with Bloomberg Television yesterday that the bank’s exposure to European sovereign debt was “manageable” and that it could do without access to U.S. money-market funds. To contact the reporter on this story: Jana Randow in Frankfurt at jrandow@bloomberg.net To contact the editor responsible for this story: Craig Stirling at cstirling1@bloomberg.net

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