MONEY MARKETS-China braces for IPO outflows,India OIS rates fall

* China money markets brace for IPO outflows

* Indian swaps tumble as aggressive bids reversed

* Dollar funding costs hit new troughs

By Umesh Desai

HONG KONG, Nov 5 (Reuters) - China money market rates rose on Thursday as a large initial public equity offer is expected to drain significant amount of funds while swap rates in India tumbled as aggressive paid positions were unwound.

The cost of borrowing dollars in the region edged lower matching last week's record low after the U.S. Federal Reserve retained its dovish stance after its rate setting meeting.

In Singapore, 3-month dollars SIUSDD=ABSG fell to 0.2843 percent from 0.28714 percent, after Federal Open Market Committee overnight statement on rates.

Speculation that the U.S. central bank could alter its tone on a supportive monetary policy had the dollar funding markets on edge on Wednesday.

But after the Federal Reserve pledged it will hold rates near zero for an "extended" period, it caused some reversing of bets particularly in aggressively hawkish markets, such as India.

"The Fed statement importantly retained the 'extended period' reference which markets were looking for, and offered some indicators that the market will now monitor closely for exit signals," Sean Keane, director of Triple T Consulting and former money market trader at Credit Suisse, said in a note.

"There appeared to be a consensus that no action was appropriate at this time, something that was perhaps a little surprising given the recent rhetoric from some of the Fed Governors," Keane said.

Indian overnight indexed swap rates fell across the board causing the curve to shift downwards as previously paid positions were unwound.

"The RBI has not hiked rates, equity markets are weak and the the rates market was bid up too high, so people are swapping out of paid positions," said a Hong Kong-based rates strategist.

Last Tuesday, the Reserve Bank of India (RBI) left key interest rates on hold as expected, but surprised markets by removing emergency liquidity support measures that were implemented to protect Asia's third-largest economy from the global downturn.

On Thursday, one year swap rates INRAMONMI1Y= fell by 7 basis points to 4.58/4.62 percent and the five year swap INRAMONMI5Y= rates eased by 10 bps to 6.56/6.60 percent, also resulting in some flattening of the curve.

Indian markets had also been pricing in early rate hikes after data released in end-October showed wholesale inflation rose at its fastest pace in six months.