Spot dollar
The rupee weakened by 13 paise to hit an all time low of 45.15/16 on Tuesday. Dealers said there was sustained dollar demand from corporates and foreign funds in a volatile market. The rupee opened at 45.03/05 as against the previous close of 45.02. "The currency fell on heavy dollar buying by state run and foreign banks," a dealer said. Banks were buying dollars for their corporates for ECB interest payments and oil payments. "Besides, demand from FIIs added fuel to fire," dealers said. The State Bank of India (SBI) reportedly did not resort to any significant dollar selling to support the rupee on behalf of the RBI. Forex dealers expect the RBI to intervene in case the rupee falls further beyond the 45.25/26 level. Meanwhile, the RBI fixed its reference rate for the US dollar at 45.13 as against 44.99 in the previous session.
FORECAST: Rupee seen weaker if the dollar demand sustains on Wednesday.

Forward premiums
Forward premiums ruled steady amid alternate bouts of paying and receivings on Tuesday. The forward premia ended lower on receiving interest from state run banks, dealers said. The sixth month premia ended at 4.17% (4.37%), with one year premium closing at 4.19% (4.32%). In the near end, August dollars ended at 15/16 paise, September at 29/31 paise, while in the far end, February at 106/108 paise and March at 121/122 paise. Call rates ruled in a narrow range of 8.00-8.30 per cent on ample liquidity in the system. The rates ended steady at 8.10-8.20 per cent. The rupee has depreciated by 3.5% since the beginning of the year. This is relatively modest compared to what the dollar's strength has done to other currencies. "Easy liquidity in the money market allowed the premia to end lower," a dealer said.
FORECAST: Premiums seen holding 4.15% levels on Wednesday.

Gilts
Short-to medium-term dated bond prices fell by 10-20 paise on Tuesday. The 11% 2006 opened at Rs 99.83 levels, but was seen around Rs 99.77 by close of trades. "The weakness in the spot rupee to below 45 levels saw quite a many off-load bonds in anticipation of stiffer Reserve Bank measures to prop up the rupee", a dealer with a primary dealership said. Call rates had opened at 8.10-8.20% levels, but the CRR hike by 0.25% - the first tranche of a two-part CRR hike by 0.50% - effective from Saturday, and a reduction in bank's refinance facilities did not have much impact on call rates or on the bond prices. "There is liquidity in the market, but sentiment is poor", a dealer said adding "It is the weakness in the rupee that affected trades in the securities market today.
FORECAST: Bond prices seen holding current levels on Wednesday.

-- (Compiled by Anurag Joshi)