Banks avoid borrowing on reporting Fridays as they have to account for call borrowings in the cash reserve ratio (CRR) liabilities while reporting their two-weekly balances to the Reserve Bank of India (RBI). At close, call rates were seen at 9-9.50 per cent. "Some stray deals were struck at 10-10.50 per cent levels", a dealer said. Dealers expect call rates to rule in the 8-9 per cent range tomorrow and slump below 8 per cent on November 6--the day the CRR cut becomes effective.

FORECAST: Call rates seen easing to 8-9 per cent levels on Friday.

SPOT DOLLAR
The rupee ended a shade weaker against the dollar on some import demand on Thursday. Opening the day at 43.4050/4150 from its previous close at 43.3950/4050, the rupee was seen in a narrow band of 43.40-4150 during in lacklustre trades. "Some bidding by a few large state-run banks put some life in an otherwise dull trading day," a dealer said.

"The rupee's movement was restricted to a narrow band as corporate interest for dollars was was minimal", a dealer with a brokerage said. Dollar buying by state-run banks and cancellations of export hedges were mainly responsible for the rupee's weakening up to 43.42 from steady opening levels, dealers said. At close, the rupee was seen at 43.4050/4150. Cash/spot was quoted higher at 2/2.25 paise in line with the higher call rates at above 9 per cent levels. Cash/tom and tom/spot closed at 0.25/0.50 paise and 1.50/2.00 paise respectively.

FORECAST: Rupee seen holding 43.4050 levels on Friday.

FORWARD PREMIUMS
Monthly premiums tracked the spot rupee and ended flat in a dull trading session on Thursday. Forward premiums showed no movement, even though sentiment in the call money market remained active ahead of the reporting Friday.

"Importers were staying away from the market, except for routine remittances, while some exporters were keen on hedging receivables before premiums fell further", dealers said. The six-month annualised premium ended at 4.99 per cent (5 per cent). "There was cancellation of export hedges on the near-end, but it was too marginal to impact the premiums," a dealer said. The monthly premiums (in paise) were 10/12 for November, 25/27 for December, 46/47 for January, 63/64 for February, 83/84 for March, 101/103 for April, 121/123 for May and 142/144 for June. "Forward premiums will trade with a downward bias as the market has factored in additional liquidity from the first phase of a one percentage point reduction in banks' CRR" a dealer said.

FORECAST: Six month annualised forward premiums seen at 5 per cent on Friday.

GILTS
Bond prices were on an uptrend on Thursday. Security prices rose by 2-4 paise on buying support from players, who picked up gilts across the maturity spectrum at lower prices. The 11.98 per cent 2004 was traded at Rs 104.05 (104.02), 11.68 per cent 2006 was dealt at Rs 102.68 (102.64) and 12.32 per cent 2011 at Rs 103.77 (Rs 103.73). Expectations of a cash reserve ratio (CRR)-induced liquidity aided buyers to build fresh positions on the expectations of booking profits in the coming days. "A rally was checked by firm call rates and some profit-taking", a dealer with a primary dealership said. The first stage of the Reserve Bank's cash reserve ratio (CRR) cut due on November 6 will infuse Rs 4,561 crore. "Until the government announces a bond auction, the market will be biddish as huge inflows are expected on account of the CRR cut," a primary dealer said.

FORECAST: Bond prices seen at moderately higher levels on Friday.