Overnight call rates went to an intra-day high of 8.50 per cent on Monday before closing at 7.90-8 per cent. Opening the day at 8.25-8.50 per cent from its weekend close at 7.80-8.10 per cent, slight demand for funds in early trades saw call rates firm up to above 8 per cent levels, above the export refinance rate. "A few state-run and foreign banks were seen borrowing in initial trades, but good supplies saw call rates softening to close at 7.90 per cent levels," dealers said. On the whole trades were dull with most struck in the 7.75 per cent to 8.25 per cent range. "Today's call rate hardening is largely a one-off thing. It is expected to soften on Tuesday with inflows of nearly Rs 2,500 crore on account of a maturing of repos," dealers said. The Discount and Finance House of India extended market support to the extent of Rs 1,700 crore.

FORECAST: Call rates seen at 7 per cent levels on Tuesday.

Spot Dollar

The rupee went to a low of 42.72/74 against the dollar beforeclosing higher at 42.67/69 on Monday. Opening the day at 42.67/69 from its last close at 42.66/68, the rupee quoted in a narrow 2 paise band between 42.69 and 42.72 for most of the day. "Dollar demand was poor both inter-bank and from the corporate side...demand rose slightly till about mid-morning on political uncertaininty. The State Bank of India reportedly sold dollars," a dealer at a brokerage said. Cash/spot closed at 0.75/1.50 paise (0.75/1 paise), cash/tom opened at 0/0.25 paise (0.62/0.87 paise) with tom/spot at 0.75/1.25 paise (0.125/0.25 paise).

The Reserve Bank fixed its reference rate for the dollar at 42.70 against the previous fix of 42.68. Meanwhile, the Euro opened the day lower at 46.40 (45.67) against the rupee, went to an intra-day high of 46.40 (46.10) before finishing at 46.31 (45.88).

FORECAST: Rupee seen at 42.69-42.72 on Tuesday.

Forward Premiums

Forwards drifted lower on Monday by 2 to 3 paise across all maturities. The benchmark six-month annualised forward coverquoted a wee bit higher at 6.99 per cent from its last close at 6.97 per cent tracking the early weakness in the spot-rupee. In the near terms, April premiums closed at 8/9 paise (9/10 paise while May quoted unchanged at 31/33 paise. "There was hardly any receiving on the part of exporters while importer interest is next to nothing...a few state-run banks including State Bank of India were seen receiving July and October dollars," dealers said, adding: "This helped premiums soften by close after opening higher". In the far terms, December premiums closed at 223/225 paise (225/228 paise) with January at 253/255 paise (254/257 paise).

FORECAST: The six-month annualised forward cover seen at 6.90 per cent levels on Tuesday.

Gilts

Bond prices quoted almost unchanged on Monday with trades concentrating largely in short-dated securities. The 12.50 per cent 2004 was seen at Rs 104.20, one paise lower from its weekend's close at Rs 104.21 while the 11.40 per cent 2000 was dealt at Rs 101.97(101.96-100.97. The 11.55 per cent 2001 went a shade higher at 101.27 (Rs 100.25-100.26) with the 11.98 per cent 2004 at Rs 102.20 (Rs 102.20). "Interest in bonds was poor today with call rates ruling firm at 8 per cent and above levels...a maturing repos on Tuesday could see bond prices at the short-end firming up a bit over the next two days," dealers said. The long-dated 11.99 per cent 2009 continued to quote higher at Rs 100.28-100.30, but few trades were seen in this security on Monday.

FORECAST: Short-dated bond prices may move up a bit on Tuesday.