The overnight call money rates moved in a narrow range on Thursday. The call rates opened at 8.10-8.20 per cent as against the previous close of 8.10-8.20 per cent. During the day the rates firmed to finally close at 8.25 per cent owing to high demand for fund and lack of sufficient supply in the system.

"Tomorrow being reporting Friday, banks are covering their uncovered position which is why call rates are ruling tight," said a money market dealer. According to money market sources, call rates are ruling tight as most primary dealers have taken refinance at 6 per cent from the central bank as the call rates are ruling almost 200 basis points above the floor level of six per cent. The liquidity is tight in the system which is clear from the fact that RBI did not receive any application for a fixed rate repo on Thursday. There was no inflow into the system through reverse repo.

Forecast: The call rates are expected to rule between 7.50-8.25 per cent on Friday.

SpotDollar

The spot rupee ruled rangebound on Thursday owing to lacklustre trading in the forex market. The Indian currency ruled in a narrow four paise range on Thursday between 42.44/47 against dollar. The Indian currency opened at 42.46/47 against dollar, two paise weaker than its previous close of 42.44/45 against dollar.

Throughout the day, the rates ruled at these levels. However, towards the fag end of the day, the rates strengthened by 2 paise to close at 42.44/45 against dollar owing to marginally high selling by banks on behalf of corporates. The rates finally closed at these levels. The RBI reference rate for US dollar was Rs 42.45, one paise lower compared with their previous level of 42.44. Meanwhile, the Indian currency opened at 46.54 against euro, recorded the intra-day high of 46.45, came down to a low of 46.12 to finally settle at 46.27 against euro.

Forecast: Rupee seen ruling between 42.43 and 42.51 on Friday.

Forward Premium

Forward premiums ruled steady on Thursday. Thepremium across all maturities opened at their previous closing level to finally settle one paise lower towards the close. The six month annualised premium was quoted at 7.1 per cen (7.12 per cent), three months at 6.7 per cent (6.95 per cent) and one month at 6.35 per cent (6.78 per cent).

According to dealers, importers are not paying at the existing rates as they do not find the rates attractive enough to pay." In the near forwards, March closed at 12-13 paise (14/15 paise), April at 36-38 paise (39-40 paise), May at 59-61 paise (61-63 paise), June at 86-88 paise (90-91 paise), July at 110-113 paise (114-116 paise), August at 135-138 paise (140-141 paise), September at 161-164 paise (165-167 paise), October at 190-193 paise (194-196 paise), November at 219-222 paise (222-2224 paise), December at 246-249 paise (250-253 paise), January at 273-276 paise (277-280 paise) and February at 298-301 paise.

Forecast: Six-month annualised forward seen at 7-7.4 per cent on Friday.

Debt Market

Gilts pricesacross the board fell by 3-6 paise on Thursday from their closing level sharply reacting to the high yield of 364-day T-bills pegged by RBI on Wednesday. Short term papers fell by 3-4 paise and long term fell by 3-6 paise. "The market strongly reacted as the price fell by 3-4 paise across the board," money market dealers said.

The 11.40 per cent 2000 paper was quoted at Rs 100.77 (Rs 100.79), 11.60 per cent 2002 paper at Rs 100.20 (Rs 100.24), 11.55 per cent 2001 paper at Rs 100.88 (Rs 100.90), zero coupon 2000 paper maturing on July 13 at Rs 87.13 (Rs 87.15), 11.78 per cent 2003 paper at 101.38 (Rs 101.40), 11.98 per cent 2004 paper at Rs 101.50 (Rs 101.57), 11.83 per cent 2003 paper at Rs 101.50 (Rs 101.55), 11.50 per cent 2004 paper at Rs 99.70 (Rs 99.75) and 11.50 per cent 2008 paper at Rs 101.40 (Rs 101.45).

FORECAST: Gilts prices are expected to rule stable on Friday.