Call rates opened at 8.50 per cent on Tuesday compared with their previous close of 8 per cent. According to dealers, most deals were struck between 8.25 per cent and 8.50 per cent. Overnight rates finally closed at 8.25 per cent.

"Most banks have already taken positions owing to half-yearly closing," dealers said. Call rates are expected to tighten next week on reduced money supply in the system.

"Most banks have received the second tranche of resurgent bond proceeds and parked them in the two-year new loan auctioned on Monday," dealers said. The outflow from the system through repos was Rs 625 crore.

On account of the approaching holidays, the interbank money market saw one-day call money transactions at 8.55-8.60 per cent and the four-day money at 8.75-8.85 per cent. The NSE's Mibid and Mibor quoted at 8.14 per cent and 8.38 per cent, respectively.

FORECAST: Call rates are seen at 8.25-9 per cent on Wednesday.

Spot Dollar

The rupee appreciated by 6 paise to42.46/48 against the dollar on Tuesday. The Indian currency opened at 42.51/52, unchanged from its previous close.

However, news that the US was likely to waive off the economic sanctions imposed on India for a year improved market sentiments. This saw the rupee appreciate to 42.46/49 and finally close at 42.45/46.

"Some dollar selling by exporters and banks resulted in an increased dollar supply. This also helped strengthen the Indian currency," said a forex dealer from a foreign bank.

The Reserve Bank of India's reference rate for the dollar was Rs 42.49 compared with the previous peg of Rs 42.53.

FORECAST: The rupee is seen at 42.46/52 on Wednesday.

Forward Premium

Near-term forward premiums softened by 1-4 paise and far-end ones by 5-6 paise on Tuesday as a few exporters received in the forwards. The six-month annualised premium quoted at 7.42 per cent (7.69 per cent), three months at 6.42 per cent (6.82 per cent) and one month at 6.12 per cent.

The October premium quoted at15-17 paise (16-19 paise), November at 38-41 paise (40-44 paise), December at 62-65 paise (65-70 paise), January at 90-93 paise (94-98 paise), February at 119-122 paise (123-128 paise), March at 149-153 paise (154-159 paise), April at 182-187 paise (187-193 paise), May at 215-220 paise (220-225 paise), June at 248-253 paise (253-258 paise), July at 281-286 paise (286-291 paise) and August at 314-319 paise (320-325 paise).

FORECAST: The six-month annualised forward premium is seen at 7.40-7.45 per cent on Wednesday.

Gilts

Prices of short-term government securities fell by 5-10 paise on Tuesday owing to high selling pressure. "The high coupon rate fixed by the central bank for the two-year paper did not improve market sentiments," dealers said.

Most primary dealers who picked up the two-year paper at the auction on Monday were seen offloading papers maturing in 2000, dealers said. The zero coupon 2000 traded at Rs 81.95 (Rs 82.05), the 11.64 per cent 2000 at Rs 100.30 (Rs 100.48) and the11.40 per cent 2000 at Rs 100-100.03.

Some selling interest was also seen in the 11.55 per cent 2001 paper which traded at Rs 99.85. The wholesale debt market of the NSE recorded trades worth Rs 538.46 crore (Rs 139.83 crore). The 11.40 per cent government loan maturing in 2000 traded worth Rs 65 crore at a weighted yield of 11.39 per cent.

FORECAST: Short-term gilt prices are expected to fall by 3-5 paise on Wednesday.