Overnight rates softened to close at 8.25-8.30 per cent on Monday. Opening the day at 8.80-9 per cent from its Saturday's close at 8.0-8.5 per cent, initial quotes were as high as 9.25 per cent. "No deals were done at 9 per cent and above levels. Initially, a few players quoted higher expecting demand for funds to be high", a dealer with a US-based bank said. Outflows of Rs 1,150 crore on Friday from Reserve Bank auction of the 12.32 per cent 2011 for Rs 2,500 crore made a few players expect call rates to perk up on Monday. "The fact that over 50 per cent of the notified amount devolved on primary dealers strengthened this feeling", dealers said. In later day deals, call rates softened to close at 8.25-8.30 per cent. Most of the deals were conducted between 8.40-8.50 per cent levels. There was no response to the Reserve Bank's three-day six-per cent fixed-rate repos held today. Elsewhere, the National Stock Exchange fixed its overnight Mibid and Mibor at 8.57 per cent and 8.75 per centwith the fortnightly one at 8.60 per cent and 9.10 per cent.

FORECAST: Call rates seen at 8.50-8.75 per cent levels on Tuesday.

Spot dollar

The rupee gained by two paise from its weekend's finish on Monday to close at 43.20/21. Opening the day at 43.22/23 from its Friday's close at 43.23/24, dull trades and poor corporate interest for dollars saw the rupee gain to 43.2250/2350 by mid-session trades. "There was good dollar supplies today. More so given the fact that the Kargil crisis has more or less blown over", a dealer with a Gulf-based bank said, adding: "Good dollar inflows because of foreign institutional investors could see the rupee gain to 43.18 levels this week". Cash/spot was quoted at 0.75/1 paise; cash/tom at 0.3750/0.50 paise with tom/spot at 0.50/0.6250 paise. The Reserve Bank fixed its reference rate for the dollar at 43.22 as against its previous fix at 43.25. Meanwhile, the euro opened at 43.96 against the rupee, went to a high of 43.97 before closing at43.79.

FORECAST: Rupee seen at 43.18/20 levels on Tuesday.

Forward prmiums

Forward premiums closed softer on Monday in line with the spot-rupee's gains to 43.20/21 levels. The one-month annualised forward cover was seen at 3.55 per cent, three-months at 3.99 per cent and six-months at 4.40 per cent. "Forward trades are dull. There is hardly any paying interest and receiving is scaterred. August dollars closed at 18/19 paise (21/23 paise), September at 32/33 paise (36/38 paise) with February at 113/115 paise (126/128 paise), March 131/133 paise (146/148 paise) and April at 151/153 paise (165/168 paise). "Forward will continue to be dull. More so, since the spot rupee is firm and in the abscence of any market moving news", a dealer with a brokerage said.

FORECAST: Six-month annualised forward cover seen at 43.5 per cent levels on Tuesday.

Gilts

Bond prices were up 7 to 20 paise on Monday. The 12.40 per cent 2013 stock was dealt at Rs 101.88 from Saturday's Rs 101.75while the 11.90 per cent 2007 stock was dealt at Rs 101.51 (Rs 101.35). "Trades were bouyant today. There are rumours that Reserve Bank may go in for a rate cut soon", dealers said. The 11.32 per cent 2011 was seen dealt at Rs 102.20 (Rs 102.14). "Liqiudity is tight as is evident from the over 50 per cent devolvement at Reserve Bank's auction of the 11.32 per cent 2011 for Rs 2,500 on Thursday. Given the low rate of inflation at 1.83 per cent, there is every reason to believe that a bank rate cut is around the corner", a bond dealer with a primary dealership said. Elsewhere, the Reserve Bank announced the auction of 14-day and 91-day T-bills for a notified amount of Rs 100-crore each on 23 July.

FORECAST: oBond prices will rally by 4 to 5 paise on Tuesday.