For the first time in the past five months, the overnight call rates cut across all barriers and crossed the upper limit of 20 per cent to touch an intra-day high of 25 per cent on Thursday owing to unusually high demand for funds by banks, who were desperately seen covering their short CRR requirement on behalf of the reporting Friday ahead.

The call rates had crossed 20 per cent mark on August 19, when the CRR was hiked to 11 per cent. The overnight call money opened at 10.75-11 per cent, unchanged from their previous close however before noon the rates touched an intra-day high of 25 per cent due to unusually high demand under tight liquidity conditions. The rates finally settled at 20 per cent towards the close.

The RBI received Rs 20 crore on Thursday through its four-day fixed rate repo at 8 per cent. "The demand for funds was quite high in the interbank market compared to low lendable resources which triggered the hike in the call rates," a senior official from STCI said.

FORECAST: Call rates are expected to remain firm on Friday.

Spot Dollar

The rupee moved in a 6 paise range on Thursday. The currency opened marginally weaker at 42.52/53 against the dollar compared to its previous close of 42.47/48 owing to little buying by corporates.

During the day, it weakened to an intra-day low of 42.54 against the dollar. However at noon, the rates strengthened by six paise to 42.49/50 against dollar owing to selling by exporters and closed at these levels. The RBI reference rate for US dollar was Rs 42.52, two paise higher than its previous peg of 42.50. The rupee remained stable against the euro throughout the day. The rupee opened at 49.51 against euro as against its previous open of 49.04, went to a high of 49.61, came down to an intra-day low of 49.40 to finally close at 49.42 against the euro. According to forex dealers, the rupee is expected to remain rangebound between 42.45-42.55 against the dollar.

FORECAST: The rupee is seen between 42.47-42.55 on Friday.

Forward Premiums

The hike in call rates on Thursday to 25 per cent saw hardening of premiums across the board by 2-6 paise. The six-month annualised premium quoted at 6.85 per cent, three-months at 6.5 and one month at 6.5 per cent.

"Due to high call rates now the one month and three-month annualised premium are quoted at the same rate," dealers said. According to dealers lot of paying pressure was seen in the market on Thursday.

January premium closed at 9.50-10.50 paise (9.50-10.50), February at 28-30 paise (28-30 paise), March at 50-53 paise (48-51 paise), April at 77-80 paise (77-79 paise), May at 99-103 paise (98-102 paise), June at 126-128 paise (123-125 paise), July at 155-158 paise (151-153 paise), August at 182-188 paise (176-180 paise), September at 209-212 paise (206-208 paise), October at 235-239 paise (233-236 paise), November at 264-268 paise (262-265 paise) and December at 293-298 paise (292-297 paise).

FORECAST: The six-month annualised premium is seen at 6.3-7 per cent on Friday.

Gilts

The hike in call rates by 14 per cent on Thursday resulted in softening of gilts prices by 5-10 paise. According to dealers there was lot of selling pressure in the market as most banks and PDs were liquidating their portfolio by selling gilts in view of the reporting Friday ahead.

Most traded securities on Thursday were 11.40 per cent 2000 paper and 11.55 per cent 2001 paper. The 11.40 per cent 2000 paper was traded at Rs 100.03-04 (Rs 100.13) and 11.55 per cent 2001 paper quoted at Rs 100.06 (Rs 100.13). The wholesale debt market of NSE witnessed trades worth Rs 368.10 crore as against Rs 353.10 crore on Wednesday. The 11.40 per cent government loan maturing in 2000 was traded worth Rs 145 crore at a weighted yield of 11.34 per cent. The commercial paper of GE Capital Services maturing on February 19, 1999, was traded worth Rs 5 crore at a yield of 10.30 per cent.

FORECAST: Gilts prices are expected to soften by 1-3 paise on Friday.