MONEY MARKETS-U.S. three-month LIBOR climbs to decade high

Nov 7 (Reuters) - A key gauge of what banks charge each other to borrow dollars for three months increased to its highest level in a decade on Wednesday ahead of the U.S. Federal Reserve’s two-day policy meeting that will begin later in the day.

The London interbank offered rate to borrow three-month dollars climbed nearly 1 basis point to 2.60113 percent following a 0.2 basis point gain on Tuesday.

Three-month LIBOR has risen in 15 of the last 16 sessions, prompted by the Fed’s rate hikes, rising U.S. government borrowing and a shrinking Federal Reserve balance sheet.

LIBOR is the benchmark rate for $200 trillion of dollar-denominated financial products, mainly interest rate swaps and floating-rate loans.

Fed policymakers are not expected to raise key short-term interest rates at their upcoming meeting, but traders waited for any clues about possible rate increases in December and in 2019.

Reporting by Richard Leong in New York; Editing by Jeffrey Benkoe