The interbank call rate on Wednesday opened weaker at 6.5-7.0 per cent compared with the previous day's close of 7.00-7.25 per cent, dealers said.The rate eased further and most transactions were concluded between 6.0-6.5 per cent, they said. The call rate ended at 5.75-6.25 per cent.

The market continued to witness easy money conditions after the Reserve Bank of India rejected the only bid worth Rs 2,000 crore it received at Monday's four-day repo auction, a dealer at a large lending institution said.

Besides, with the government securities market being dull today, the demand for overnight funds was reduced to that extent, dealers said.

The call rate is likely to ease further on Thursday, dealers said. Most expect the call rate to open around six per cent levels and end lower at around 4-5 per cent.

FORECAST: Call rates seen easier on Thursday, seen in a 4-6 per cent band.

Spot dollar: The rupee on Wednesday reacted sharply to prime minister IK Gujral's statement in a leading newspaper that the domestic currency is overvalued and needs correction.

The rupee opened sharply lower, at 35.75-35.79 to a dollar, from the previous close of 35.71-35.72. The fall continued as the market saw increased dollar buying after the newspaper quoted Gujaral's statement that the finance ministry and the central bank are jointly working towards prescribing a band within which the rupee will move against the dollar. The rupee touched the day's low of 36.18 by 10.00 am when a clarification from the central bank said that no such move has been mooted and termed the news report as ``misleading''. The market reacted to RBI's clarification and the rupee began to firm up and touched 35.80. At this level, importers began to cover and the rupee closed at 35.92-35.97 -still weaker from the opening range.

FORECAST: Rupee seen firm at around 35.90-35.92 on Thursday.

Forward premia: Premiums on the forward dollar market firmed sharply reacting to Gujral's statement in a leading newspaper on Wednesday that the rupee was overvalued, dealers said.

Six month dollar premiums opened higher at 6.10 per cent over the spot dollar rate compared with the previous day's 6.0 per cent and soon shot up to 8.0 per cent in intraday trades, they said. January and July premiums rose immediately in morning trades, dragging up premiums on the other months too, a dealer at a brokerage said. The market was dominated by speculators and importers.

Six month dollar premiums closed at 8 per cent and the premiums showed no signs of easing despite an RBI clarification stating the newspaper report to be ``misleading''. The market expects the premiums to remain volatile on Thursday as importers are expected to cover in forwards in a big way.FORECAST: Premiums seen firmer on Thursday.

Gilts: The government bond market on Wednesday witnessed good selling pressure as banks sold bonds reacting to the newspaper report on the domestic currency, dealers said. The selling was largely in the medium-term maturing stocks, they said.

A few dealers said banks sold securities to stay liquid in case the RBI, as per the report, prescribes a band for the rupee . ``If it is so then banks will take advantage of the interest differential between the domestic and forex markets,'' said a chief dealer at a private-owned bank.

``But today banks could not take advantage of this because the forex market was very volatile,'' he added. The medium-term stocks were down by 40-50 paise from the previous day's traded levels, dealers said. Volumes at the NSE were down at Rs 361.12 crore compared with the previous day's Rs 448 crore.

FORECAST: Yields seen rising further as selling interest expected to continue.

Copyright © 1997 Indian Express Newspapers (Bombay) Ltd.