WRAPUP 4-Money markets ease as cen banks offer dollar funding

(adds details of Libor fixings, background)

* ECB, BoE, SNB to offer unlimited dollar funds and regular weekly auctions

* 3-month euro Libor posts biggest decline this year

* 3-month dollar Libor has steepest fall since March

* Euribor rates ease across the board

By Marc Jones and Vidya Ranganathan

FRANKFURT/SINGAPORE, Oct 13 (Reuters) - Money market rates fell on Monday after Europe's central banks promised to lend commercial banks as much U.S. dollar funding as they need.

In the latest joint bid to thaw frozen money markets, the U.S. Federal Reserve, the European Central Bank, the Bank of England and the Swiss National Bank also scrapped their existing dollar auctions in favour of a new fixed rate system.

The moves were welcomed by traders and had an instant impact on bank-to-bank lending rates.

The interbank cost of borrowing in dollars, sterling and euros all fell. Three-month euro Libor posted its biggest decline this year, three-month dollar Libor had its steepest fall since March and Euribor rates eased across the board.

The Libor premium over anticipated official borrowing costs measured using average Overnight Index Swap rates -- a key gauge of financial market stress -- also dropped.

"I think this will be hugely helpful, to be honest and the market has a better feel today," said one London-based money market trader.

"Given the fact that they are going to allot whatever you need it should bring levels down particularly at the short end."

One-week, 1-month and 3-month dollar funds are all included in the plans. The fixed rate of interest will be set by the banks on the day of each operation.

Coming on top of a wide range of bailouts, guarantees and liquidity injections potentially worth trillions of dollars, the new measures are the latest attempt by central banks to persuade commercial banks to lend to one other again.