Banks to repay €61bn in ultra-cheap loans For the ECB, however, this should be positive as it is likely to reduce the upward pressure on money market rates and the downward pressure on inflation through the exchange rate. Two-year Eonia rates fell after Friday's announcement and Euribor futures rose - both signals of lower rate expectations. German bond yields also fell across the curve. The euro hit a six-week low of $1.3157 from around $1.3210 beforehand and was down slightly on the day. Last month's bigger-than-expected repayment of the first round of the cheap loans led to higher market interest rates. The market-driven unwinding of the ECB crisis measures stands in contrast to the policies being pursued by central banks in the United States and Japan, which are looser. This policy contrast had helped drive up the euro, which is also supported by investor confidence that the bloc will hold together after Draghi's pledged last July that the ECB would do "whatever it takes" to preserve the single currency. Early repayment is a badge of honour for banks anxious to impress investors and ratings agencies and distance themselves from more cash-strapped rivals. Reuters calculations show excess liquidity in the euro zone - the level of cash beyond what banks need to cover their day-to-day operations - has dropped since the first chance to repay the first loan on January 30. The excess measure has fallen to below €500bns from some €600bn prior to the first repayment. "Excess liquidity won't disappear any time soon, and we'll be at current market rate levels for a long time if the situation does not change fundamentally," Nordea analyst Jan von Gerich said following Friday's announcement. Draghi said earlier this month that even after the repayment of the second three-year loan, excess liquidity should remain well over €200bn, which he said would confirm "the monetary policy stance as being accommodative." Joachim Nagel, a board member at the German Bundesbank, said excess liquidity levels must be watched closely. "If the excess liquidity in the banking system abates significantly, then it would be time to consider an exit from the non-standard measures brought on by the crisis," Nagel told Reuters, without giving a specific level. It is not yet completely clear when exactly it will be time for the exit. The markets and the financial system are still far too fragmented for that. I warn against declaring an end to the crisis despite the calmer phase on markets in recent months.