Jan. 5 (Bloomberg) -- The London interbank offered rate, or Libor, for three-month dollar loans may hold near the lowest level in 4 1/2 years as central banks inject money into economies and financial companies to combat the credit squeeze.

The rate was at 1.42 percent as of 9:25 a.m. in London, according to Wilson Chin, a fixed-income strategist in Amsterdam at ING Groep NV, the largest Dutch financial-services company. That’s within one basis point of the lowest level since June 8, 2004. The three-month Hong Kong dollar rate, or Hibor, fell five basis points to 0.9 percent today, the lowest level since January 2005.

“People are generally more optimistic in all markets now, hoping that policy makers will prevent systemic collapses and stimulate growth,” said Dariusz Kowalczyk, chief investment strategist at SJS Markets Ltd. in Hong Kong. “Central banks continue to ease when they can and the risk component in money- market rates is also declining.”

Central banks have countered the seizure in credit markets by slashing interest rates and lending unprecedented amounts of cash directly to banks, helping to bring down Libors to their lowest levels in more than four years. The three-month Libor is 116 basis points above the Fed’s target, compared to an average of 12 basis points in the year before the crisis.

Libor, the benchmark for $360 trillion of financial products worldwide according to the British Bankers’ Association, is set by a panel of banks in a survey by the BBA before noon each day in London.

To contact the reporter on this story: Gavin Finch in London at gfinch@bloomberg.net; Matthew Brown in London at mbrown42@bloomberg.net

Last Updated: January 5, 2009 05:24 EST