The overnight rates firmed up on Friday. The call rates opened at 7 per cent, compared with their previous close of 6.25-6.75 per cent. They opened higher owing to corporates and banks' demand for funds in the morning. However, they eased in the afternoon to 6.50-6.75 per cent and finally closed at 6.75 per cent. Most deals were struck at 6.50-6.75 per cent, dealers said. The call rates is likely to hover at Friday's level for a few days, dealers said.

The Reserve Bank of India mopped up Rs 100 crore through a three-day fixed-rate repo in government of India dated securities.

The central bank received only one application and accepted it. The turnover of the Securities Trading Corporation of India was Rs 2,000 crore on a weighted average of 6.75 per cent.

FORECAST: The call rates are expected to hover around 6.50-6.75 per cent on Saturday.

Spot Dollar

Positive sentiments owing to the US Senate announcement that it will remove some of the sanctions lifted the rupeein the forex market.

The rupee, which opened at 42.50/54, much stronger than its previous close of 42.57/60, strengthened further on good dollar-selling by banks and exporters to touch its intra-day high of 42.44, dealers said.

"There was a lot of selling in the early part of the day by banks and corporates," a dealer in a private sector bank said. After touching 42.44, the rupee fell as a foreign bank entered to buy dollars on behalf of its corporate client to touch its intra-day low of 42.54.

The rupee subsequently closed at 42.52/54.

FORECAST:The rupee is seen in the 42.50-42.60 band on Monday.

Forward Premiums

The forward premiums softened on Friday as the spot rupee strengthened to its intra-day high of 42.44. The six-month forward premium strengthened as the spot rupee gained to close at 8.72 per cent.

July premiums closed at 9 paise, August at 37 paise and September at 69 paise. The one-month annualised premium closed at 6.25 per cent (7.25 per cent), the three-monthone at 8 per cent (8.8 per cent) and the six-month one at 8.72 per cent (9.48 per cent).

The one-year annualised premium also fell below the psychological mark of 10 per cent to close at 9.7 per cent (10.16 per cent). "Forwards opened 7-8 paise stronger than their previous close. They tracked the spot rupee where sentiments have improved. Paying pressure has eased considerably," a dealer said. Dealers said that with improved sentiments the forward rupee will soften further.

FORECAST: The six-month annualised forward premium is seen in the 8-8.5 per cent band on Monday.

Gilts

The government securities market witnessed heightened activity on Friday. The prices at the shorter end moved up by 5-10 paise. Both nationalised and foreign banks were seen trading short-dated government securities.

A lot of buying interest was seen in the government security maturing in 1999 at a coupon of 12.65 per cent, the 1998 paper at a coupon of 13.65 per cent and the 2000 paper at zero coupon, dealerssaid. The Reserve Bank of India closed it sale window for the three-year paper maturing in 2001 offering a yield of 11.55 per cent.

The wholesale debt market of the National Stock Exchange witnessedtrading worth Rs 306.47 crore.

The zero coupon government bond maturing in 2000 was traded for Rs 40 crore at a weighted yield of 11.15 per cent.

FORECAST: Prices in the short-dated government securities are expected to go up on Saturday.