Overnight rates finished on reporting Friday at 8-8.25 per cent. Opening the day at 10-10.25 per cent, a shade higher from its last close at 10.10-10.15 per cent, lower demand for funds at close of the reporting cycle saw call rates hover briefly at 10.25 per cent in intra-day trades, before settling at 10.10 per cent thereabouts in later day deals. "A few banks and primary dealers were seen borrowing at start of trades to square of their refinance outstandings from the Reserve Bank", a dealer with a US-based bank said. Call rates have ruled softer this week following last Saturday's move by the Reserve Bank's to place seventeen 364-day T-Bills on its open market operation (OMO) window. "The Reserve Bank's decision to privately place the 12.29 per cent 2010 for Rs 3,500 crore today has further allayed fears of any tightening in liquidity in the near term", a dealer at a Gulf-based bank said, adding: "The market now expects a cash reserve ratio (CRR) cut in the upcoming credit policy". Elsewhere, the NationalStock Exchange pegged its reference rate for the overnight Mibid and Mibor at 9.19 per cent (10 per cent) and 9.77 per cent (10.15 per cent).

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

SPOT DOLLAR

The rupee continued to hold firm against the dollar on Friday. Opening the day at 43.4175/4250, poor corporate demand for dollars saw the rupee hold these levels for most of the day. "Corporate interest for dollars is poor... trades will pick up only after the Reserve Bank's credit policy", a dealer with a European bank said. The rupee went to an intra-day low of 43.4350 before finishing a shade higher at 43.39/40. State-run banks were not seen bidding for dollars. Cash/tom quoted 2/2.25 paise (0.50/0.6250 paise), cash/spot at 2.50/2.75 paise (2.50/3 paise) with tom/spot at 0.50/0.75 paise (2/2.25 paise). The Reserve Bank pegged its reference rate for the dollar at 43.42 as against its previous 43.45. Elsewhere, the Euro opened the day at 46.80 (46.59) against the rupee, went to an intra-day high of 46.94 (46.87) before closing at 46.57 (46.75).

FORECAST: Rupee seen at 43.3950/41 levels on Monday.

FORWARD PREMIUMS

Premiums held stable on Friday. The six-month annualised forward premium was quoted unchanged at 5.53 per cent. October premiums finished 2/3 paise (3/4 paise) with April at 122/124 paise (124/125 paise) and May at 142/144 paise (144/145 paise). "Trades were dull... the decline in call rates on Rporting Friday also helped premiums rule stable", a dealer with a Gulf-based bank said. Premiums have tracked the lower call rates since last Saturday when the Reserve Bank placed seventeen 364-day T-Bills on its open market operation (OMO) window. The Reserve Bank's decision to privately place the 12.29 per cent 2010 for Rs 3,500 crore today has further allayed fears of any tightening in liquidity in the near term. "Premiums are seen holding current levels until after the credit policy... a cash reserve ratio (CRR) cut is expected, and few will take a view until after this materialises", a dealer with a brokeraga said.

FORECAST: Six-month annnualised forward cover seen at 5.50 per cent levels on Monday.

GILTS

Bond prices quoted a shade higher on Friday. The 11.90 per cent 2007 was dealt at Rs 102.85 levels (102.78); 11.99 per cent 2009 at Rs 102.53-102.55 (Rs 103.46) and the 12.32 per cent 2011 finished at Rs 103.53-103.55 (Rs 103.46-103.48 levels). "The perk up in bond prices follows the Reserve Bank's decision to privately place the 12.29 per cent 2010 for Rs 3,500 crore today, allaying fears of any tightening in liquidity in the near term", a dealer with a primary dealership said. The 12.60 per cent 2018 was seen at Rs 104.31-104.33 with the 12.40 per cent 2018 at Rs 103.53-103.55 levels. "The private placement and the placing of seventeen 364-day T-Bills on the Reserve Bank's open market window at attractive yields between 10 per cent and 10.35 per cent has bouyed bond prices", a dealer with a US-based bank said.

FORECAST: Gilt prices seen may gain a shade on Saturday.