Nov 21 (Reuters) - A key measure of what banks charge each other to borrow dollars for three months recorded its biggest daily rise in eight months on Wednesday on expectations that the U.S. Federal Reserve would increase short-term lending rates next month.
The London interbank offered rate (LIBOR) to borrow three-month dollars rose 2.381 basis points to 2.67694 percent, the highest level in a decade.
This was the largest one-day increase since March 20.
Three-month LIBOR has risen nearly 28 basis points since the end of September.
In addition to expectations of further Fed rate increases, three-month LIBOR has moved higher on growing 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 expected to raise the target range on key lending rates at 2.25-2.50 percent at a two-day meeting on Dec. 18-19, marking their fourth rate increase in 2018.
Reporting by Richard Leong Editing by Susan Thomas