Call rates ruled above 10 per cent levels on Friday. Opening the day at 10-10.25 per cent from its overnight close at 9.90-10 per cent, call rates continued to rule firm ahead of the state-loan auction for Rs 3,250.08 crore on September 8.

Call rates have ruled at 10 per cent and above after Reserve Bank's auction of the 11.99 per cent 2009 for Rs 2,500 crore last Friday. "Trades were nominal, and the market was squarish today. Holiday in a few centres for Gokulashtami saw dealers take it easy. Call rates touched 10.25 per cent in early trades as a few banks were trying to push rates up", a dealer with a Gulf-based bank said.

At close of trades, call rates were seen at 10-10.10 per cent. Most of the deals were conducted around 10.10 per cent level. "Demand for funds was matched by supply. Most banks are coverung ahead of Reporting Friday for cash reserve ratio requirements on fears of call rate firming up after the the state-loan auction", a dealer with a US-based bank said. TheReserve Bank of India will hold a six-per cent four-day repos on Saturday.

FORECAST: Call rates seen at 10.15 per cent levels on Saturday.

Spot Dollar

The rupee held firm against the dollar on Friday. Opening the day at 43.5175/52, almost unchanged from its overnight close at 43.51/52, but recovered a shade to 43.5050/51 by mid-session with a few corporates selling dollars. At close of trades, the rupee was seen stronger at 43.49/50. "Reserve Bank deputy governor, YV Reddy's statement that the central bank would pursue its medium term objective to reduce bank's cash reserve ratio (CRR) to a minimum saw the rupee close at 43.49/50", a dealer with a brokerage said, adding: "The rupee is not going below 43.52 as the market is wary that the State Bank may sell dollars at these levels". Cash/spot was quoted at 2.20/2.50 paise (2/2.50 paise) with cash/tom also at 2.20/2.50 paise (0.50/0.6250 paise).

The Reserve Bank fixed its reference rate for the dollar at 43.51 as against its previous43.52. The euro opened at 46.44 (45.89) against the rupee, went to a high of 46.63 (46.44) before closing at 46.50 (46.41).

FORECAST: Rupee seen at 43.4850/51 on Monday.

Forward Premiums

Forward premiums quoted softer on Friday. The six-month annualised forward cover was seen 5.56 per cent (5.72 per cent). January dollars quoted at 97/98 paise (112/114 paise) with February at 116/118 paise (120/122 paise). Dealers said demand for forward and spot-dollars was thin with corporate and bank offices closed in many centres for Gokulashtami.

"Premiums opened lower in the morning and it the movement remained south wards all day", a dealer with a with a brokerage said. Reserve Bank, deputy governor, YV Reddy's statement that the central bank would pursue its medium term objective to reduce bank's cash reserve ratio (CRR) saw premiums soften. A few banks and corporates were seen receiving following Reddy's statement. "Reddy's statement partly nullified the spurt in premiums seen over the weekafter the Reserve Bank's announcement of a state-loan auction for Rs 3,250.08 crore on 8 September, and outflows of Rs 2,500 crore after the auction of thec 11.99 per cent 2009 last Friday", dealers said.

FORECAST: Six-month annualised forward cover at 5.50-5.60 per cent on Monday.

Gilts

Bond prices rose on Friday across all maturities. The 11.99 per cent 2009 was dealt at Rs 102.10-102.12 (Rs 102.95-102) with 12.50 per cent 2004 at Rs 105.13-105.15 (Rs 105.05-105.10). "Reserve Bank deputy governor, YV Reddy's statement that the central bank would pursue its medium term objective to reduce bank's cash reserve ratio (CRR) saw bond prices rally", a dealer with a European bank said.

Bond prices had fallen this week by over 20 paise after the announcement of the state-loan auction for Rs 3,250.08 crore on September 8, and outflow of Rs 2,500 crore last Friday after the auction of the 11.99 per cent 2009. The 12.32 per cent 2011 was dealt lower at Rs 103.10-103.12 (Rs 102.90-102.96 levels)with 11.15 per cent 2002 at Rs 101.03-101.05 (Rs 100.96).

FORECAST: Bond prices to hold current levels on Saturday.