The overnight rates remained easy on Thursday. The call rates opened at 7.50-7.75 per cent, compared with their previous close of 7.75-8 per cent.

The rates ruled at 7.00-8.00 per cent during the day and finally closed at 7.00-7.25 per cent.According to dealers, traditional lenders were missing from the market. "Almost all small lenders have turned into borrowers," a dealer said.

There is ample liquidity in the system, dealers said. The Reserve Bank of India mopped up Rs 3,567 crore through a three-day fixed-rate repos. The interest rate for the repos was pegged at 5 per cent.

The Discount and Finance House of India extended market support of Rs 1,800 crore, while the Securities Trading Corporation of India's turnover was Rs 3,200 crore on a weighted average of 7.41 per cent.

FORECAST: The call rates are likely to hover around 7.50-8 per cent onFriday.

Spot Dollar

The spot rupee was volatile on Thursday as it touched an intra-day high of 42.50 before weakening toclose at 42.70/72 -- marginally weaker than its previous close of 42.68/70.

Dealers said that the rupee opened at 42.65/70, slightly stronger than its previous close, and strengthened with corporates bringing in dollars and importers abstaining from buying.

"There was a lot of import cancellation which led to strengthening of the rupee. Corporates are selling dollars and booking profits," a dealer in a foreign bank said. Dealers said that most dealings were conducted at 42.51/57 and the rupee faced a resistance level at 42.60.

But a sudden burst of buying by a few banks saw the rupee weaken to close at 42.70/72.

The State Bank of India was seen buying dollars on behalf of its corporateclients.

FORECAST: The rupee is likely to rule between 42.50 and 42.70 on Friday.

Forward Premiums

The forward rupee strengthened on Thursday, tracking the spot rupee. The six-month forward rupee firmed up by 10 paise and remained at this level for some time before another bout of receiving saw itfirm up by 4-5 paise. However, towards the end of the day, sudden weakness in the spot rupee saw corporate paying which led to the weakening of the six-month forward rupee by 10-11 paise. The six-month forward fell to close at 11 per cent, down from its previous close of 11.55 per cent.

Dealers said that there was paying pressure, but this was towards the end of the trading hours as banks, which were covering in the spot, were seen paying in the forwards.

The one-month forward (annualised) eased marginally to close at 11.70 per cent (11.75 per cent) and the one-year forward closed at 10.7 per cent (11 per cent).

FORECAST: The six-month (annualised) forward premium is expected to rule at 10.5-11.5 per cent on Friday.

Gilts

Prices in the short-dated government securities went up by 5-10 paise on Thursday morning as the rupee appreciated against the dollar.

"A couple of deals were struck in the morning as there was a lot of buying interest in the short-dated securities," a dealersaid.

However, as the rupee depreciated in the afternoon, prices in the short-dated securities also came down by 10 paise as buyers lost interest. The wholesale debt market of the NSE witnessed trading worth Rs 158.58 crore. The 2001 security was traded for Rs 45 crore at a weighted yield of 11.34 per cent. The 11 per cent government loan maturing in 2002 was traded for Rs 13 crore at a weighted yield of 11.46 per cent. The 364-day treasury bills maturing on July 3, 1998, were traded for Rs 9.50 crore at a weighted yield of 7.10 per cent.

FORECAST: Prices in the short-dated government securities are likely to move up by the weekend.