Overnight call rates continued to hold firm at 8 per cent and above levels on Tuesday despite inflows of Rs 2,500 crore on account of maturing of repos.

Opening the day at 8-8.05 per cent from its last quote at 7.90-8 per cent, call rates went to an intra-day high of 8.10 per cent before recovering to 7.75-8 per cent by close of trades.

"Quite a few banks were seen covering ahead of the holiday on Wednesday. Others did not want to lend as the auction of a 10-year 12.25 per cent state paper is around the corner," dealers said.

Others like IndusInd Bank's head (forex trading) said: "State Bank of India dollar sales may also have sucked rupee liquidity out of the system".

FORECAST: Call rates seen at 7.90-8 per cent levels on Thursday.

Spot Dollar

The rupee went to a low of 42.78 against the dollar before closing at 42.74/76 on Tuesday. The AIADMK general secretary J Jayalalitha's statement that the withdrawal of support to BJP government is inevitable made themarkets jittery. Opening the day at 42.69/72, the rupee went to its low of Rs 42.78 before dollar sales by the SBI which helped the rupee to recover to 42.70 level. "The SBI a reportedly sold close to $50 million at levels ranging between 42.76 and 42.78. Trades were largely inter-bank.

The rupee's weakness today was largely on account of this rather than corporate interest for dollars," a dealer at a US-based bank said.

The RBI fixed its reference rate for the dollar at 42.71 against the previous fix of 42.70. The Euro opened the day lower at 46.15 (46.40) against the rupee, went to an intra-day high of 46.40 (46.40) before finishing at 46.31 (46.31).

FORECAST: Rupee seen at 42.75-42.80 levels on Thursday.

Forward Premiums

Forwards closed slighly higher by 2 to 3 paise across all maturities on Tuesday on account of inter-bank paying interest. The six-month annualised forward cover went higher at 7.20 per cent from its last close at 6.99 per cent.

"The rupee weakness in the spotaffected forwards, but only to a marginal extent. There was not much of paying by corporates in the forwards. Most appear to have covered their positions", a dealer at a brokerage said. April premiums closed at 9/10 paise (8/9 paise) with May at 32/33 paise (31/33 paise). In the far terms, December premiums closed at 224/226 paise (223/225 paise) with January at 254/255 paise (253/255 paise).

FORECAST: The six-month annualised forward cover seen at 7.10 per cent levels on Thursday.

Gilts

The government securities prices quoted firm on Tuesday. Trading interest was poor on account of firm call rates at over 8 per cent levels."Most banks feel comfortable with their existing securities portfolio, and are reluctant to take any fresh positions ahead of the credit policy.

This apart, bankers are expecting the the auction of a 10-year 12.25 per cent Rs 3,440 crore state loan on April 21," dealers said.

The 12.50 per cent 2004 was seen a shade lower at Rs 104.16-104.18. The Monday's levelwas Rs 104.20. The 11.40 per cent 2000 went unchanged at Rs 101.97 as also the 11.55 per cent 2001 at 101.27. The 11.98 per cent 2004 was traded higher at Rs 101.25-101.27 from its overnight close at Rs 102.20. The 11.99 per cent 2009 was seen at Rs 100.28-100.30 levels.

FORECAST: Short-dated bond prices may hold current levels on Thursday.