The interbank overnight call money rates tightened on Monday as it closed at the interbank refinance rate owing to huge demands for funds in the market by borrowers wanting to cover their position in the interbank market and absence of traditional lenders from the market.

The interbank call rates opened at Friday level of 6-6.50 per cent in the morning. According to money market sources, due to huge borrowing by private sector and foreign banks wanting to cover two days position firmed up the call rates further. The call rates closed at the interbankrefinance level of 9 per cent in the afternoon.

The inflow into system by way of a fixed rate repo was to the tune of Rs 2,200 crore. According to sources, major nationalised banks kept away from the overnight call market which contributed to tightening in the interbank rates as demand for funds was more than the supply.

FORECAST: The call money rate is expected to hover at 6-7.50 per centon Tuesday.

Spot Dollar

Therupee lost ground by 6-7 paise on Monday on bearish sentiments after the State Bank of India said that it is extending the date for the closure of the Resurgent India Bond by a week.

Dealers said that that the market was disappointed at the response to theRIB.

The rupee opened at 43.13/15 weaker than the previous close of 43.08/10.The rupee touched an intra day low of 43.24 in intra day trading but regained on low demand.

"Corporates are still covering their positions which saw the rupee weaken", a dealer in a private bank said.

However the rupee recovered on weak demand at the end of the day to close at 43.16/17."

Volumes were not very high from Monday, but brisk trading was on," said a dealer with a brokerage.

FORECAST: The rupee is seen in the 43.00-43.25 band on Tuesday.

Forward Premiums

Short term forward premiums hardened on Monday after the inter-bank call rates touched 8 per cent. The one month forward premia closed at 8.2 per cent up by 50 basis points from Friday'slevel.

"Forex markets continues to be volatile. The market is jittery on account of the volatility in the Japanese yen, its after effects on other Asian currencies and the threat of devaluation of the Chinese renminbi", ICICI Securities said in a daily commentary.

Forward premiums went up initially as players thought there would be heavy paying pressure. "But this did not occur as premiums fell marginally. But it closed higher than the previous close", a dealer in a private bank said.

The three-month, six-month and yearly annualised premiums quoted higher at 8.37 (7.88 per cent), 8.47 per cent (8.15 per cent) and 9.32 (9.00 percent).

FORECAST: The six-month annualised forward premium is seen in the 8.5-9.25 per cent band on Tuesday.

Gilts

The volatility in the overnight call money market resulted in a fall in security prices across the board by 7 paise to 10 paise. According to money market dealers, volatility in the interbank money market coupled with the selling by a largenationalised bank led to fall in securities prices, however later in the day prices recovered by 2 paise to 3 paise.

According to money market dealers, most traded securities on Monday were the three-year paper selling at 11.55 per cent, four-year paper offering a coupon of 11.68 per cent. The wholesale debt market of NSE witnessed trades worth Rs 321.98 crore.

The 11.55 per cent government loan maturing in 2001 was traded worth Rs 95 crore at a weighted yield of 11.41 per cent. The 12 per cent government stock maturing in 1999 was traded at a weighted yield of 9.35 per cent.

FORECAST: The prices of government securities are expected to appreciate on Tuesday.