Overnight rates firmed up to 7.75-8 per cent on Reporting Friday. Opening the day at 7.50-8 per cent from its last close at 7.50-7.90 per cent, call rates ruled in the same band for most of the day. "The market witnessed good demand for funds. Many borrowers left their positions uncovered expecting rates to ease on Reporting Friday, and they had to square up their position. Most of the deals were struct around 7.75 per cent level", a dealers with a US-based bank said.

At close, call rates were seen at 7.90-8 per cent thereabouts. The Reserve Bank did not get any bids at its four-day 6 per cent fixed-rated repos held today. The Discount & Finance House of India extended market support to the tune of Rs 1,550 crore today. The National Stock Exchange's overnight Mibid and Mibor quoted at 7.30 per cent (7.75 per cent) and 7.77 per cent (7.94 per cent) with the 14-day ones at 8.17 per cent (8.20 per cent) and 8.91 per cent (8.90 per cent).

FORECAST: Call rates seen at 7.90-8.15per cent levels on Saturday.

Spot Dollar

The rupee held firm against the dollar on Friday. Opening the day at 42.9150/9250 from its last close at 42.92/93, the rupee hold on to these levels in dull and listless trades. The rupee went to an intra-day low of 42.9350/9450 in mid-session trades to close at 42.93/94. "The market was very quiet today.

There was fairly good dollar supply coupled with lower corporate demand. The rupee could have appreciated marginally, but the State Bank of India was seen buying dollars holding the rupee at a tight range", a dealer with a brokerage said. Cash/spot quoted at 1.75/2 paise (1.50/1.75 paise) with cash/tom at 1.75/2.50 paise (1.25/1.50 paise) and tom/spot unchanged at 0.25/0.50 paise. The Reserve Bank of India pegged its reference rate for the dollar at 42.94 as against its previous fix at 42.93. Meanwhile, the rupee opened at 44.22 (44.48) against the euro, went to an intra-day low of 44.34 (44.62) to finally close at 44.23 (44.13).

FORECAST: Rupee seen at42.92-42.94 levels on Monday.

Forward Premiums

Forward premiums drifted further lower on Friday. Near forwards eased by 1 to 2 paise while far forwards came down by 4 to 5 paise. The six-month annualised forward cover closed at 5.40 per cent (5.48 per cent) with the one-year going at 6.17 per cent (6.29 per cent). "Save for some scattered receiving, there was hardly any activity. Premiums softened in line with a firm spot-rupee. The rupee would have gained had the State Bank of India not bought dollars.

The view on the rupee is bullish, and few corporates are paying in the forwards", a dealer with a brokerage said. In the near terms, June premiums closed at 11/12 paise (12/13 paise), July at 29/30 paise (30/31 paise) with August quoting at 48/50 paise (51/52 paise) while in the far terms, February dollars closed at 185/188 paise (192/193 paise) with March at 212/215 paise (218/221 paise).

FORECAST: Six-month annualised premium seen between 5.38-5.44 per cent levels onMonday.

Gilts

Bond prices held firm on Friday. The 11.75 per cent 2006 went at Rs 102.39; 12.25 per cent 2008 at Rs 103.36/103.37 with the 12.40 per cent 2013 going at Rs 101.99-102.00 levels (Rs 101.95-Rs 101.98). The 12.29 per cent 2010 went at Rs 102.89. "The only change was seen in the 11.99 per cent 2013, which was quoted at Rs 101.61 on Thursday. The Reserve Bank re-issued the 11.99 per cent 2009 for Rs 2,000 crore at Rs 101.40 as also 11.98 per cent 2004 for Rs 3,000 crore at Rs 102.85.

After the private placement, the 11.99 per cent 2013 went lower at Rs 101.55 levels. Price on this particular security will correct itself, and may go up to 101.70 thereabouts on Monday", a bond dealer with a British-bank said.

FORECAST: Long-bond prices may fall a bit on Saturday.