According to market sources, dollar buying by the central bank through aclutch of state-run banks has arrested the rupee's rise to some extent. Therupee has gained six paise since February 29. Forex dealers attributed thefirm trend to the large forex inflows hitting the market.

Most of the inflows in March has come on account of fresh inflows fromforeign institutional investors (FIIs), who have been net buyers in thecountry's equity markets to the tune of around $100 million this month. TheFIIs have bought equities for a net amount of $852 million this year.

The RBI "intervention" has injected rupee funds into the banking system,which has allowed the call rates to remain hover around the second levelrefinance level of 10 per cent. Call money rates, which touched a high of 11per cent in Monday trades ended at 9.75-10 per cent levels on Tuesday.

"Banks and primary dealers are increasingly relying on refinance to remainfairly liquid. Liquidity has been tight after RBI announced its open marketoperations to suck out the excess liquidity floating in the system," asenior dealer with a primary dealership said.

According to RBI released figures, refinance availed of by banks and primarydealers was Rs 13,146 crore at the bank rate and 2,295 crore at 200 basispoints over bank rate as on March 6. "Demand for funds for repayingrefinance availed from the apex bank may put some pressure on the callrates," a dealer said.

The apex bank on Tuesday evening added five 364-day treasury bills (T-bills)its purchase list. "In case the response is good, this measure is expectedto inject around Rs 2,500 crore into the system. The RBI removed fourT-bills maturing in January-February, 2001, while retaining two othersmaturing in December this year.

"Fresh supplies of rupee funds has been the prime reason for the moneymarket remaining stable on Tuesday. The RBI has had a role in providingcomfort level to the market," the treasurer of a private bank said. u"The lack of volatility in the market particularly the government bondmarket comes just three days after the RBI deputy governor Y V Reddy hintedof a bond auction of Rs 4,000-5,000 crore this month," a state-run bankdealer said, adding: "Had funds been tight, bond prices would have fallensharply".

Dealers expect the RBI to place bonds on its open purchase window. There arestrong chances of the Centre placing further bond issues on a privateplacement with the RBI to remove the pressure from the money market.