* Three-month Libor touches highest level in over 7 years
* Three-month Libor/OIS spread narrows from recent wide
* One-year Libor falls for third straight day
NEW YORK, Aug 25 (Reuters) - A closely watched measure of the cost for banks to borrow three-month dollars rose on Thursday to its highest level in more than seven years, with tentative signs that its rise may be losing steam.
The London interbank offered rate on three-month dollars , a benchmark for more than $300 trillion worth of financial products worldwide, has climbed more than 30 percent since late June as U.S. money market funds have scaled their holdings of short-term bank debt in advance of new regulations that go into effect on Oct. 14.
Since July, some U.S. prime money market funds, which had been major holders of commercial paper and other bank debt, have changed over to funds that hold only government securities.
Government-only money funds are exempt from rules on share value and fees from the U.S. Securities and Exchange Commission that will take effect on Oct. 14.
Earlier Thursday, three-month dollar Libor was fixed at 0.82933 percent after holding at 0.82544 percent the previous three days.
However, its premium versus the three-month overnight indexed rate, which measures traders’ expectations on bank borrowing cost in three months, eased from its widest level since early 2012 set on Aug. 12, according to Reuters data.
This spread between three-month Libor and three-month OIS was last at 0.399 percent, compared with 0.390 percent on Thursday and its recent wide of 0.417 percent earlier this month.
Meanwhile, Libor for other maturities were broadly lower from Tuesday.
One-month Libor rose to 0.52383 percent, which was just shy of Tuesday’s 0.52439 percent, which was its highest since March 2009.
Six-month Libor edged up to 1.22428 percent. On Tuesday, it was 1.22900 percent, which was its highest since June 2009.
One-year Libor declined for a third straight day to 1.52611 percent. On Monday, it hit 1.53294 percent, which was its highest since July 2009.
Reporting by Richard Leong; Editing by Nick Zieminski