After staying put at 7.00-8.50 per cent the whole of last week, the overnight rates eased on Monday. The call rates opened at 7-7.25 per cent, compared with their previous close of 7.75 per cent. The rates eased in the afternoon to 6.70 per cent and finally closed at 6.50-6.75 per cent, dealers said.

There was ample liquidity in the system to meet the demand. The Reserve Bank of India mopped up Rs 4,012 crore through a three-day fixed-rate repos. The RBI received four applications and accepted all of them. The turnover of the Securities Trading Corporation of India was Rs 2,800 crore and the weighted average rate was 6.86 per cent. The Discount Finance House of India extended Rs 2,500-crore support to the system.

FORECAST: The call rates are likely to tighten following the central government's Rs 5,500-crore auction on July 1.

Spot Dollar

The rupee held steady against the dollar in a dull forex market on Monday.The rupee opened at 42.58/60, slightly stronger than itsweekend close of 42.62/64. Lacklustre corporate demand for dollars and import cancellations saw the rupee gain in later trades to an intra-day high of 42.51. It finally closed at 42.51/53.

"Quite a few banks unwound their long dollar positions... dollar supply was good," dealers said.

Cash/spot and cash/tom opened at 3/4 paise, strengthened to 6/8 paise and finally closed at their early morning levels. Monday's cash/spot and cash/tom are value dated July 1. The Reserve Bank of India will remain closed for the finalisation of its annual accounts on Tuesday.

Elsewhere, the Reserve Bank of India pegged its reference rate for the dollar at 42.56, compared with its previous close of 42.71.

FORECAST: The rupee is seen in the 42.50-60 band on Tuesday.

Forward Premiums

The six-month annualised forward cover softened to close at 10.82 per cent on Monday, compared with its previous close of 11 per cent, as the rupee gained in the spot market.

In the near forwards, July premiums rose by 3 paise to39/42 paise as importers cancelled and rolled over their June contracts. August premiums closed at 76/79 paise, September at 116/119 paise and November at 190/193 paise. In the long forwards, April premiums closed at 379/383 paise, May at 413/416 paise and June at 442/450 paise.

"Exporters did realise a part of their receivables... this coupled with import cancellations saw premiums soften," dealers said. Pressure on the forwards eased as rumours of a likely review of the Glenn Amendment sanctions and the World Bank's approval of a $543-million loan to Andhra Pradesh on Saturday had a positive impact on the market.

FORECAST: The six-month annualised forward cover is seen in the 10.80-10.90 per cent range on Tuesday.

Gilts

Prices in the government securities market held steady on Monday morning. However in the afternoon, prices at the shorter end fell by 15-20 paise as a financial institution was seen offloading short-dated securities worth Rs 100-150 crore.

The wholesale debt market of theNSE witnessed trading worth Rs 201.46 crore. The 13.40 per cent government loan maturing in 1999 was traded for Rs 55 crore at a yield of 10.74 per cent. The 13.65 per cent government loan maturing in 1999 was traded for Rs 35 crore at a yield of 10.10 per cent. Commercial papers of Reliance Industries and Telco maturing on July 6 and July 8 were traded for Rs 5 crore each at 9 per cent.

FORECAST: Prices of short-dated government securities are expected to remain at Monday's level on Tuesday.