The interbank call rate remained rangebound on Tuesday, moving between 8.95 per cent and 9.5 per cent, dealers said.

The call rate opened at 9.25-9.50 per cent, higher from the previous close of 8.75-9.00 per cent, they said. The firm trend in the call rates reduced trading interest in the government bond market.

Most call deals were concluded between 9.00 and 9.25 per cent, dealers said. The call rate is expected to move in a similar range on Wednesday, they added.

The rate crossed Reserve Bank of India's refinance rate of 9 per cent offered to banks. Banks can avail refinance from the RBI, which is based on their outstanding export credit portfolio. But most borrowing banks have already exhausted this limit which pushed up the call rate to above 9 per cent levels, a dealer at a private-owned bank said.But most dealers do not expect the call rate to firm up further on Wednesday from today's traded range.

FORECAST: Call rate seen in a similar range on Wednesday.

Spot Dollar

The RBI intervened in the spot as well as the forward dollar markets to curb speculative tendencies that pushed up the dollar, dealers said on Tuesday.

The rupee opened in a wide range of 39.70-39.80 to a dollar and touched an intraday high of 39.85 in early trading forcing the RBI to step in, they said.

The weakening of the rupee was mainly on account of speculative buying of the greenback, a dealer at a brokerage said. The RBI sold around $50-$100 million in early trades, he added.

RBI's selling propped up the rupee to 39.50-39.60 per dollar. The rupee rally, however, continued as market leader SBI entered and began selling the greenback. SBI's entry pushed up the rupee to around 39.50. The bank turned a buyer of dollars in afternoon trades for a short while, which weakened the rupee to 39.55 per dollar. But the bank again turned seller and Re appreciated, closing at 39.35-39.39 to a dollar.

FORECAST: Dollar seen firm on Wednesday, RBI intervention likely.

Forward Premia

Premia on the dollar for future deliveries remained buoyant for most of the day, dealers said on Tuesday. The Reserve Bank of India stepped in and sold March, June and July deliveries in a bid to discourage speculative activity, they said.

At the far end, premia eased from the day's peak but were still firmer from the opening levels, a dealer at a brokerage said.Six-month dollar contracts opened at an annualised rate of 9.8 per cent over the spot rate and touched a peak of 10 per cent before settling to 9.9 per cent.

The six-month premium was firmer from the previous close of 9.5 per cent. Near-term dollar contracts remained firm despite the intervention. Dealers said December dollars were traded at an annualised rate of 14 per cent during the day. The higher premiums at the near end, besides genuine import demand, were mainly because of the uncertainty on short-term interest rates, they said.

FORECAST: Premia seen firmer on Wednesday.

Gilts

The tightness in the interbank call rates forced banks to raise funds through repurchase agreements of government securities, dealers said on Tuesday.Most repo deals were for a 14-day period and ranged between 8.75 and 8.85 per cent. Two repo deals were for a 13-day period at 8.75 per cent. The repo deals totalled Rs 165 crore.

The government bond market was otherwise dull. Traded volume at the NSE was Rs 105.5 crore compared with the previous day's traded volume of Rs 344.50 crore.

Yields were higher from the previous levels due to the firmness in the interbank call rates that forced sellers to lower their offer prices, dealers said."Only cash-rich, state-owned banks and a few financial institutions bought government bonds," said a dealer at a state-owned bank.The yields are expected to drop further on Wednesday as the interbank rates are seen maintaining the current firm trend, dealers said.

FORECAST: Yields may rise further on Wednesday.

Copyright © 1997 Indian Express Newspapers (Bombay) Ltd.