Overnight rates flared up to 9.40 per cent levels on Friday as disturbances continued on the border. "There is a feeling in the market that call rates could tighten if the the situation on the border worsens. Call rates were firm at 8.30 per cent on Thursday when bond prices also crashed by 25 to 75 paise, and the trend spilled over today", dealers said. Opening the day at 8.70-8.90 per cent from its last close at 8-8.10 per cent, call rates went higher to its intra-day high of 9.40 per cent as a few state-run banks kept away. By close of trades, however, call rates had eased to 8.80-9 per cent. No application was received at the Reserve Bank of India's four-day 6 per cent fixed-rate repos held today. Quite a few deals were struck between 9.15 per cent and 9.30 per cent, dealers said. Elsewhere, the National Stock Exchange pegged its overnight Mibid and Mibor rates at 8.08 per cent (8.per cent) and 8.22 per cent (8.09 per cent).

FORECAST: Call rates seen at 8.75-9.0 per centlevels on Saturday.

Spot dollar

The rupee went to an intra-day low of 43.09/10 against the dollar on Friday, but recovered smartly to close at 42.93/94. Opening the day at 43.05/06, almost unchanged from its last close, the rupee went to 43.09/10 levels as a few banks bid the dollar anticipating corporate interest. "The rupee movement was largely on account of banks buying dollars. Corporate interest for dollars was, however, poor. The rupee recovered on unwinding of long-dollar positions by corporates", Mecklai Financial Services' senior vice-president, KN Dey, said. Cash/spot went at 2.25/2 paise (0.25/0.50 paise). The Reserve Bank of India pegged its reference rate for the dollar at Rs 42.99 as against its previous peg at 42.90. Meanwhile, the Indian currency opened at 44.70 (44.66) against the euro to finally close at 44.10 (44.95).

FORECAST: Rupee seen at 43/43.10 levels on Monday.

Forward premiums

Forward premiums softened on Friday as the spot rupee gained to 42.93levels. The six-month annualised forward cover quoted at 5.96 per cent (6.30 per cent) while the one-year annualised quoted at 6.53 per cent (6.90 per cent). "Premiums across all maturities fell, spreads also narrowed down. It appears as if corporates covered their positions in the last session on Thursday. The one-year annualised forward cover, which quoted at 6.84 per cent in the morning had gone lower to 6.53 per cent by close of trades", dealers said. June dollars closed at 19/20 paise (20/25 paise), July at 41/44 paise (42/47 paise) and August 62/65 paise (63/68 paise). In the far forwards, January went at 178/183 paise (184/191 paise), February at 204/209 paise (209/219 paise) with March at 230/237 paise (238/248 paise).

FORECAST: Six-month annualised forward cover seen at 5.70 per cent levels on Monday.

Gilts

Bond prices recovered on Friday despite firm call rates. "Prices rallied as sentiment in the forex markets improved. Higher call rates did not have much of an effect", dealerssaid. The 11.40 per cent 2000 went at Rs 102.53-102.55 (Rs 102.52 levels) while the 12.50 per cent 2004 went at Rs 103.95 (Rs 103.80). In the long-terms, the 12.40 per cent 2013 was seen at Rs 101.45-101.50 (Rs 101.35-101.36); 12.32 per cent 2011 paper at Rs 102.20-102.25 (Rs 102.10 levels) with the 11.99 per cent 2009 at Rs 101.75-101.77 (101.52 levels). "Bond prices across all maturities gained today. The trend may continue next week", a bond dealer said. The 12.29 per cent 2010 went at Rs 102.25-102.30 (Rs 102.05 levels).

FORECAST: Bond prices seen holding current levels on Saturday.