Overnight rates flared up to an intra-day high of 20 per cent on Wednesday. Opening the day at 11.50-11.75 per cent, unchanged from its previous close, call rates held these levels in early trades. "There was demand for funds... it was okay in early trades, but call rates firmed up in the second session with quite a few state-run banks turning borrowers", a dealer said, adding: "It is quite possible that a few players got their CRR calculations wrong... it is a thin market and even moderate demand for funds can push up call rates".

Fund-inflows during the current fortnight are estimated at Rs 2,800 crore. Most of the deals were struck at 15 per cent levels, but a dealer at BoB said "I have lent funds at 20 per cent". At close, call rates were seen at 13-14 per cent. Elsewhere, the National Stock Exchange pegged its overnight Mibid and Mibor at 11.46 per cent (11.09 per cent) and 11.71 per cent (11.32 per cent) with the fortnightly one at 10.55 per cent (10.45 per cent) and 11.28 per cent (11.09 per cent).

FORECAST: Call rates seen at 12 per cent levels on Thursday.

Spot Dollar

The rupee weakened in intra-day trades to a low of 43.52/54 on Wednesday. Opening the day at 43.44/46 from its last close at 43.43/44, inter-bank short-covering saw the rupee go lower to 43.51 levels. "The military coup in Pakistan affected trades today... the rupee hit its intra-day low of 43.54 in early morining trades as banks went long-dollars in expectation of a further slide in the rupee", a dealer with a European bank said. In later day trades, the State Bank's dollar sales steadied the rupee which closed at 43.43/44. "Corporate interest for dollars was only marginal...I think it is a one-off thing", a dealer with a brokerage said. Cash/tom was quoted 0.75/0.8750 (1.50/1.75 paise), cash/spot at 1.50/1.75 paise (0.75/0.8750 paise) with tom/spot at 1/1.25 paise (0.75/1 paise).

The Reserve Bank fixed its reference rate for the dollar at 43.50 from its previous day's 43.37. The Euro opened at 46.68 (46.10) against the Euro, went to an intra-day high of 46.95 (46.34) to finally close at 46.79 (46.32).

FORECAST: Rupee seen at 43.45 levels on Thursday.

Forward Premiums

Forward premiums quoted higher across-the-board on Wednesday. The six-month annualised forward closed 5.54 per cent (5.32 per cent) with the one-month premium at 6.57 per cent (5.33 per cent). "There was paying interest today especially in the far forwards", a dealer with a brokerage said. October premiums finished unchanged at 13/14 paise (11/12 paise) with April at 135/137 paise (127/128 paise) and May at 155/157 paise (147/149 paise). Premiums have gone up over the last two days. On Tuesday, dealers attributed the rise in premiums to FIIs pulling out around $ 39 million from the equities market at the start of the week after bringing in over $40 million last week end. "The perk up in premiums was largely on account of the higher call rates and less due to any weakness in the spot-rupee", a dealer with a European bank said.

FORECAST: Six-month annualised forward cover seen at 5.40 per cent levels on Thursday.

Gilts

Bond prices fell across the board on Thursday. The 11.99 per cent 2009 was dealt at Rs 102.39 (Rs 102.52) with the 12.40 per cent 2013 at Rs 103.40 (Rs 103.53). "Firm call rates at 15 per cent levels with a few stray deals at 20 per cent or so affected trades today", a dealer with a primary dealership said. The 11.90 per cent 2007 was seen at Rs 102.68 levels (Rs 102.84) with the 11.75 per cent 2006 at Rs 102.50 (Rs 102.62). The Life Insurance Corporation reportedly bought securities worth Rs 300 crore. "Trading interest on the whole has been poor in the run up to the Reserve Bank's busy-season credit policy... firmer call rates today compounded the situation today", a dealer with a European bank said, adding: "I think sentiment will change on Thursday... bank will be able to avail of the 12 per cent additional collateralised lending facility".

FORECAST: Gilt prices may gain a shade on Thursday.

Compiled by Raghu Mohan