Overnight call rates closed at 11.0-11.5 per cent, off early highs of 12.25-12.75 and compared to its previous close of 11.75-12.25 per cent on Wednesday. Call rates closed on a softer note on Thursday as lenders were unable to hold rates at the morning levels after banks completed their borrowing requirements, dealers said.

"Lenders were quoting higher rates in the morning since there was demand from banks which had not completed their borrowing for last weekend," a dealer at a European bank said. "However, once these banks had completed their borrowing there were surpluses in the system," he said. Some banks had received large funds from corporates making advance tax payments and until these funds were drawn by the government there would be surpluses in the system, dealers said.

Forecast: The inter bank call rates are expected to ease on Friday.

Spot Dollar

The Indian rupee ended weaker on Thursday as compared to its previous close on early short dollar covering bybanks. The rupee ended at 43.54/5425 per dollar after it opened from its previous close of 43.5175/5225 in the morning. Dealers said the rupee was mostly traded in a weaker band amid early dollar purchases by the country's largest bank, the State Bank of India, and a few other state-run banks.

SBI and the other banks bought dollars at 43.54 levels in morning trade but were sellers at the same level later in the day, they said."It appears the authorities wanted to protect 43.54 levels today. SBI and other banks were selling dollars at that level. Normally you don't buy and sell at the same levels," a foreign bank chief dealer said. SBI is viewed by dealers as a surrogate of the central bank. Dealers said the early purchases were to fund a large public sector remittance.

FORECAST: The rupee is expected to weaken further on Friday.

Forward Premiums

Forward premiums ended lower on receiving by state-run banks and stop-loss receiving by other banks on the back of lower call moneyrates."Banks have been sitting extra paid in anticipation of the liquidity crunch. Since call closed lower today there must have been some stop loss receiving," a dealer said. The six-month premium ended at 5.44 per cent against the previous close of 5.67 per cent. Dealers said that premiums ended lower on receiving (buy-sell swaps) by state-run banks. According to them dollar supplies were thin as the normal dollar flows from foreign funds had slowed down on account of the elections, they said. "There is some demand. The dollar is being quietly bid," a dealer at another foreign bank said.

FORECAST: Forwards are expected to ease on account of easening of overnight call rates.

Gilts

Government bond prices shed some of the sharp gains made at mid-day and were still above morning levels as call money ended lower, dealers said.Dealers said bond prices rallied in afternoon trade on the back of lower call rates, but there was profit taking at higher levels. "Prices moved up by 10 paise in theafternoon, but came off in evening trade," a primary dealer said. The 12.40 per cent gilt maturing in 2013 was dealt at 103.27 in evening trade, off highs of 103.33 in the afternoon and compared to morning's level of 103.24. The 11.99 per cent gilt maturing in 2009 was dealt at 102.26 in evening trade, off highs of 102.28 and compared to 102.19/20 in morning trade. Dealers said buying interest was subdued as liquidity was expected to be thin during the reporting period on account of advance tax outflows from banks. Forecast: Buying interest is expected to remain the short term securities where dealers can book profits once liquidity eases.

-- Compiled by Reuters/Anirban Nag