This, coupled with a hike in cash reserve ratio (CRR) to 11 per cent beginning next fortnight, and the repos rate to 8 per cent, will see premiums go up.

RBI sources said the measures are intended to curb excessive speculation. A high degree of volatility marked Thursday's trade with the rupee trading between 43.70 and 43.20 in the early hours. The Indian currency finally closed at 42.80/90-- up from Wednesday's close of 43.55/60.

Says Kanji Pitamber & Co partner Gautam Rasiklal Ashra: "Volumes will dip as a result of not allowing rebooking of cancelled forward contracts and delinking spot and forward legs. Quite a lot of transactions of this nature will cease to be done...as a result, the forward segment will turn illiquid...pricing will tend to be characterised by wide quotes even for small amounts."

IndusInd Bank treasury head Moses Harding said: "Corporates will cease to have a window to trade in the forward segment...I see lower volumes and wide quotes in the forwards".

The impact of Reserve Bank's measures saw near annualised forward covers close sharply higher: one month at 19.04 per cent (9.85 per cent), three months at 14.3 per cent (9.25 per cent), six months at 12.43 per cent (9.4 per cent). The one-year annualised forward closed at 11.5 per cent (9.52 per cent).

Forwards are likely to move up further on account of the hike in CRR to 11 per cent from 10 per cent and repo rate to 8 per cent from 5 per cent. Says American Express Bank treasury head N Venkatramanan: "Premiums will inch upwards with a tightening in interest rates and lack of liquidity in the forwards." His view is seconded by Ashra: "The hike in CRR to 11 per cent and repos rate to 8 per cent will increase the cost of inter-bank funds...this will lead to higher premiums".

The hike in CRR to 11 per cent will result in an outflow of Rs 5,000 crore. While the inflow on account of Resurgent India Bond proceeds (50 per cent in rupees) is expected to reduce the net outflow figure, call rates are set to firm up. The picture, dealers said, will clear when the higher CRR becomes operational from the fortnight beginning August 29.

Overnight rates shot up to a high of 10 per cent in the morning as against the previous close of 7-7.50 per cent. Lenders were quoting at 15 per cent in the afternoon, dealers said. Call rates ended Thursday at 9.50 per cent.

Market observers also noted that Reserve Bank's move to seek open and peak intra-day positions from banks means that a few inter-bank players were actively speculating.