LONDON, Sept 30 (Reuters) - The cost of swapping euros into dollars on the 'cross currency basis' market rose to its highest in four years on Friday, as growing concerns over Deutsche Bank led to increased demand for dollars across the financial market spectrum.

Cross currency basis is seen as a measure of the scarcity of one currency relative to the other, and is often considered a broader gauge of the health of the banking system.

In a smooth-functioning market there is usually a small premium for dollars over euros. It has been persistently high all year, and on Friday the three-month basis widened to -62 basis points from -53 bps , marking the largest premium for dollars in four years.

"The three-month cross currency has widened on worries about Europe's banking sector. There are fears that the U.S. money market funds may be reluctant to lend dollars to Europe," said a trader at an European bank.

Shares in Germany's biggest lender fell below 10 euros for the first time following a Bloomberg report that some hedge funds had withdrawn some excess cash and adjusted positions, a sign that counterparties are wary of doing business with it.

(Reporting by Jamie McGeever and Anirban Nag; Editing by Sujata Rao) ((jamie.mcgeever@thomsonreuters.com; +44)(0)(207 542 8510;))