"In retrospect, it seems people underestimated inflows into central bank open market sales. Many of them also seem to have left their positions uncovered last week on expectations that call would be easy," a primary dealer said. This led to a marginal rise of call rates initially. The call rates eased marginally towards close on increased supply and settled at previous closing level of 8.90-9.00 per cent, a leading dealer said.

FORECAST: The call rates are likely to rule at these levels till Friday.

Spot Dollar

The rupee remained under slight pressure with increased corporate demand for the greenback. Opening the day at 42.45/46, little changed from its overnight close, the local currency went lower to 42.46/47 in late noon trades as a few foreign banks and corporates bid for dollars. "There was a fair bit of demand from importers who were rolling over their forward positions, impacting on the spot-rupee," said Mecklai Financial Services' senior vice-president, KN Dey. The State Bank of India was seen doing two-way deals, but it's sell-quote at 42.47 levels capped the rupee's southward movement. At close, the rupee was seen at 42.46/47 levels. "Quite a few banks reportedly unwound their overnight long-dollar positions built in anticipation of the rupee breaching the 42.50 barrier on Wednesday," a dealer at a European bank said. Cash/tom went at 0.50/1 paise (0.50/0.75 paise) with cash/spot at 0.25/0.50 paise (0.75/1 paise). The Reserve Bank of India pegged its reference rate for the greenback at 42.47, down by sevenpaise from its previous peg at 42.37.

FORECAST: Rupee is seen in the 42.47-42.54 band on Thursday

Forward Premiums

Near-term forwards dipped a bit on Wednesday, but there was no respite in the far-forwards, which held firm at their overnight quotes. The six-month annualised forward cover was seen at 7.80 per cent at close of trades, up marginally from Tuesday's 7.75 per cent. Receiving was seen up to May with the State Bank of India leading the pack for the March and April premiums. March premiums closed at 108/111 (110/115) paise, April 141/144 paise (141/146 paise) and May 174/177 paise (173/178 paise). "Importers are rolling over their forward contracts and exporters are staying away from receiving. Far-forwards were quoted relatively unchanged today, but paying pressure seems to be building up," dealers said. June dollars went at 200/209 paise (207/212 paise), July 239/242 paise (238/243 paise) and August at 272/275 paise (268/273 paise).

FORECAST: Six-month annualised forwards seen at 7.8-7.95 per cent band on Thursday

Gilts

Select bond prices began clawing back up after an early dip on Wednesday. The prices had fallen after call rates tightened on account of a shortage of funds on Tuesday. Dealers estimate nearly Rs 5,000 crore of purchases of bonds by banks from the central bank's open market sale window were conducted.

Among the securities that were traded was the 11.40 per cent 2000 which was dealt at 100.05 Rupees against the previous closing levels of Rs 100.01. The 11.64 percent 2000 bond also recovered to Rs 100.40 after trading earlier in the day at Rs 100.35. Trading volumes were thin, dealers said."These could be one-off deals, there is still no clear trend visible," a foreign bank dealer said. A bond broker said the market awaited the results of a 364-day treasury bill auction later in the day for a fresh direction to prices.

FORECAST: Bond prices are expected to firm up after call rates ease.