Overnight rates came of their early highs to close at 8-8.05 per cent on Monday. Opening the day wide at 8-8.25 per cent from its weekend's close at 8.10-8.20 per cent, call rates eased in later day trades on better liquidity and lacklustre demand for funds. "Liquidity has definetely improved as is evident from the single bid for Rs 33 crore at the Reserve Bank three-day fixed-rate rates held today", a dealer with a US-based said. No response was seen to the Reserve Bank's repos over the last three weeks. Most of the trades were struck at around 8.05-8.15 per cent thereabouts today. Inflows of around Rs 2,200 crore are due this fortnight by way of interest payments on dated-stock and and redemption of T-bills. Elswhere, the National Stock Exchange fixed its overnight Mibid and Mibor at 7.75 per cent (8 per cent) and 8.01 per cent (8.11 per cent) with the fortnightly one at 8.32 per cent (8.32 per cent) and 8.85 per cent (8.87 per cent).

FORECAST: Call rates seen at 8.05-8.15 per cent levels on Tuesday.

Spot dollar

The rupee weakened by by two paise on Monday in intra-day trades to 43.3350. Opening the day at 43.3150/3250 from its last close at 43.3050/3150, the rupee held its early levels till mid-session trades. "There was adequate dollar supplies...corporate interest for dollar was also poor", a dealer with a brokerage said, adding: "Sentiment on the spot-rupee is far from bearish". Reserve Bank figures released over the weekened put the country's forex reserves at $33.306 billion on July 23, up from $32.951 billion a week earlier. The Commerce Ministry also said that exports in June increased by 11.14 per cent to $2.61 billion over June last year. Towards close of trades, the State Bank's dollar interest put slight pressure on the rupee which went to its day's low of 43.3350 before finishing at 43.3250/3350. Cash/tom quoted at 0.25/0.50 paise (1.75/0.8750 paise), cash/spot at 0.50/1 paise (1.50/1.75 paise) with tom/spot at 0.25/1 paise (0.25/0.50 paise). The Reserve Bank pegged its reference rate for the dollar at43.32 as against its previous peg of 43.29. The euro, meanwhile, opened at 46.24 (46.29) against the rupee, went to a high of 46.33 (46.50) before closing at 46.19 (46.30).

FORECAST: Rupee seen at 43.3250 levels on Tuesday.

Forward premiums

Forward premiums held firm on Monday. The six-month annualised forward cover was quoted at 4.36 per cent (4.41 per cent). "Corporate interest for forward dollars continues to be weak...premiums held rocksteady moving one to three paise band", dealers said, adding: "Last week, month-end demand for dollars moved premiums, but it is unlikely that any such impact will be seen this fortnight". December dollars finished at 91/93 paise with January at 105/107 paise. FIIs have pumped in a net amount of $343.6 million in bourses between July 1 and 28, and since January'99 have pumped $1.248 billion. "Month-end import rollovers are over...premiums appear to have bottomed out and unless they go higher, it is unlikely that there will be any receiving interest at these levels", a dealer with a US-based bank said, adding: "Moody's re-affirment of its "stable" ratings for India will ensure that premiums range from lower to current levels".

FORECAST: Six-month annualised forward cover seen at 4.40 per cent levels on Tuesday.

Gilts

Bond prices rallied by over 20 paise in intra-day trades. The 12.40 per cent 2013 stock was dealt up to Rs 102.96 (Rs 102.65). "There is enough liquidity in the system, and buying interest all round", dealers said. The 12.32 per cent 2011 was dealt at Rs 103.05 with the 11.90 per cent 2007 at Rs 102.58 (Rs 102.20). "Prices fell after the Reserve Bank announced that it will hold a priced-based of the 11.99 per cent 2009 for Rs 3,000 crore on 5 August", a dealers said, adding: "but prices recovered by close of trades". The 11.90 per cent 2007, which was quoting at Rs 102.55 before the announcement of the auction fell to Rs 102.45 before recovering to Rs 102.58. Dealers said that the priced-based auction of the 11.99 per cent 2009 will sail through. "There are inflows of around Rs 2,200 crore this fortnight by way of interest payments on dated-stock and and redemption of T-bills...inter-bank liquidity is also okay, and there is no reason for the auction not go through", dealers said.

FORECAST: Bond prices rise by ten to 15 paise on Tuesday.