The cost for European banks to borrow in dollars dropped to the lowest in more than two months, according to a money market indicator. The three-month cross-currency basis swap, the rate banks pay to convert euro interest payments into dollars, was 43 basis points below the euro interbank offered rate at 10:25 a.m. in London from 44 yesterday, data compiled by Bloomberg show. The cost is the cheapest since May 7. The one-year basis swap was little changed at 51 basis points, or 0.51 percentage point, below Euribor. Three-month Euribor, the rate banks say they see each other lending in euros, was set at a record low 0.422 percent today. The euro overnight indexed average, Eonia, was set at 11.4 basis points yesterday from a record low 11.3 the day before. An estimate of overnight borrowing costs over the next three months, the Eonia OIS swap, was 9.8 basis points from 9.4 yesterday. Banks increased overnight deposits at the Frankfurt-based ECB yesterday, placing 337 billion euros ($409 billion) from 324 billion euros on July 24. To contact the reporter on this story: Katie Linsell in London at klinsell@bloomberg.net To contact the editor responsible for this story: Paul Armstrong at parmstrong10@bloomberg.net

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