MONEY MARKETS-Dlr bank rates edge up as credit woes linger

* Three-month dlr Libor ticks up as credit stress persists

* Three-month euro, stg Libor fall for 6th straight week

* U.S. money market funds survive historic low yields

* Fed's money market facility may narrow spreads

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By Kirsten Donovan and Richard Leong

LONDON/NEW YORK, Nov 21 (Reuters) - The amount banks charge each other for unsecured dollar funds edged up on Friday, showing credit woes are far from over, with liquidity dwindling and renewed problems in the financial sector.

Spreads between three-month interbank and policy rates showed persisting reluctance among banks to lend.

In other troubling developments, three-month dollar rates inched higher with evidence of a global recession continuing to mount. Worries intensified over the survival of U.S. automakers and the future of Citigroup (C.N), the No. 2 U.S. bank. For more, see [ID:nPEK8463].

"Getting risk back will be the greatest challenge today," said Thomas di Galoma, head of government bond trading at Jefferies & Co. in New York.

Some risk appetite returned, with Wall Street posting a modest recovery after Thursday's rout that sent it to its lowest level in 11 years.

"The whole market is on tenterhooks at the moment. The risk trade has come back into fashion very rapidly and banks have been suffering on equity markets," said David Keeble, Calyon's global head of interest rate strategy in London.

Such worries resulted in a sizable rally for government bonds and interest rate futures on Thursday, some of which fed through into Friday's fixing of London interbank offered rates, mainly in sterling and euros.

Three-month euro Libor rates EUR3MFSR= fell 5 basis points to 4.004 percent, the lowest since April 2007, while equivalent sterling rates GBP3MFSR= fell 3 basis points to 4.038 percent. Three-month sterling and euro rates ended lower for sixth straight weeks.

In contrast, the fall in three-month dollar rates USD3MDFSR= sputtered again. They edged up nearly half a basis point, at 2.158 percent. For more, see [ID:nLL306425]

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