Call rates opened at 5-5.5 per cent on the reporting Friday, well below the repo rate of 8 per cent. Overnight rates ruled at the opening levels throughout the day, compared with their previous close of 8.75 per cent.

"There was little demand for funds in the morning as most banks had covered their positions," dealers said. However towards the close, the rates firmed up to 7 per cent owing to marginal demand for funds.

"There was some corporate demand for funds in the afternoon when the spot rupee weakened to 42.38/40," dealers said. Call rates finally closed at 7 per cent. The total inflow into the system was Rs 425 crore while the outflow was Rs 2,353 crore through three-day 8 per cent fixed-rate repos.

FORECAST: Call rates are seen at the repo level on Monday.

Spot Dollar

Standard & Poor's downgrading of the country's long-term foreign currency rating to BB created panic in the forex market on Friday, which saw the rupee weaken to an intra-day low of 42.38/40against the dollar. The Indian currency opened at 42.28/30, unchanged from its previous close.

"The news of yet another downgrade created panic in the market and importers rushed in to cover their positions by buying dollars which saw the rupee weaken to 42.38/40," a dealer from a private bank said. "Quotes were also made at 42.40/42," dealers said. To control the rupee from sliding further, the State Bank of India entered the market and sold at 42.27/29," a dealer from a foreign bank said.

The rupee finally closed at 42.28/29. The Reserve Bank of India's reference rate for the dollar was Rs 42.29 against the previous peg of 42.30.

FORECAST: The rupee is seen at 42.26/38 on Monday.

Forward Premiums

Forward premiums across all maturities firmed up on Friday owing to paying pressure by importers when the rupee was hovering at 42.38/40 against the dollar. Near-term premiums firmed up by 2-3 paise and far-end ones by 5-6 paise compared with their previous closing levels.

"Expectations offurther weakening of the rupee saw importers covering at these levels," forex dealers said.

The six-month annualised premium quoted at 8 per cent (7.25 per cent), three months at 7.7 per cent (7.35 per cent) and one month at 5.7 per cent (7.10 per cent). The October premium quoted at 2-3 paise, November at 22-24 paise, December at 50-52 paise, January at 79-83 paise, February at 110-130 paise, March at 142-145 paise, April at 174-179 paise, May at 207-211, June at 240-244 paise, July at 272-277 paise, August at 307-310 paise and September at 338-342 paise.

FORECAST: The six-month annualised premium is seen at 8 per cent on Monday.

Gilts

Standard & Poor's downgrading did not have any impact on the government securities market. Gilt prices moved in the narrow band of 1-2 paise throughout the day.

Trades were seen only in the 13.70 per cent 1999 paper, the 12.25 per cent 2008 paper and the 91-day treasury bills maturing on January 16, 1999, at 10.8 per cent. The 13.70 per cent 1999 papertraded at Rs 101.69 and the 12.25 per cent 2008 paper at Rs 99.71.

The wholesale debt market of the NSE witnessed trades worth Rs 167.75 crore. The 11.98 per cent government bond maturing in 2004 traded worth Rs 40 crore at a weighted yield of 12.06 per cent. The 14-day treasury bills maturing on October 31, 1998, traded worth Rs 23 crore at a weighted yield of 8.8 per cent. Commercial paper of Reliance Industries maturing on December 23, 1998, traded worth Rs 10 crore at a weighted yield of 10.83 per cent.

FORECAST: Short-term gilt prices are seen stable on Monday.