CHINA'S interbank borrowing rate fell to the lowest in three weeks as the quarter-end liquidity squeeze eased.

The weighted average for the benchmark seven-day repurchase, or repo, rate fell to 5.42 percent yesterday, the lowest since June 7, according to the Shanghai Bank Interbank Offered Rate published daily.

But the rate was still higher than 4.16 percent on July 2 last year and the annual normal range of between 3 and 4 percent.

??We expect the market to be stable in the coming days but the rate will be higher than usual,'' said Wang Nan, researcher of Wanda Futures. "Banks still need money to pay reserve requirement on July 5, and the central bank is still ambiguous about open market operations."

China's stock market rose for the second straight day yesterday by 0.8 percent as sentiment stabilized.

The seven-day rate has declined for six of the seven trading days since it peaked at a decade-high of 11 percent on June 20.

Banks have suffered from the decade's worst liquidity squeeze in the past month as the People's Bank of China didn't inject money to meet quarter-end demand.