Dollar o/n rates ease slightly, credit woes linger

SINGAPORE, Oct 17 (Reuters) - U.S. dollar short-term funding costs eased slightly in Asia on Friday, although stress remained in several local markets because of heightened counterparty and credit risks despite all the cash governments have pumped in.

Overnight dollar deposits fell to between 1.25 and 1.75 percent in Singapore SIUSDD=ABSG, which is one of the two freest markets in Asia.

Traders said most deals for overnight dollars were done around 1.75 percent, which, while higher than the Federal Reserve's 1.5 percent target, is still below the London inter-bank fixing of 1.9375 percent on Thursday.

In South Korea, which has an acute dollar funding shortage owing to the heavy dependence of banks on wholesale funding and the flight of capital from the country, overnight dollar rates were quoted at 2 percent.

"It is higher here for local branches, including those of foreign banks," said a trader in Seoul.

A trader in Kuala Lumpur said overnight dollar deposits were quoted at 1.65 percent there, but rates were softer at 1.5-1.75 percent in Jakarta. (Reporting by Vidya Ranganathan; Editing by Tomasz Janowski)