Call rates hardened at close of trades to 7.75-7.80 per cent levels on Thursday. Opening the day at 6.5-6.60 per cent, call rates remained firm at 7.25 per cent for most of the day, but demand for funds towards the fag end of the day saw call rates firm up to close at 7.75-7.80 per cent. "Volumes were low, and additional demand for funds towards close was only to the extent of Rs 50-60 crore...most banks have covered their positions ahead of Reporting Friday," dealers said. Outflows to the tune of Rs 6,535 crore on Wednesday via the Reserve Bank's 6 per cent three-day repos was cited as a reason for even small amounts pushing up call rates. The discount and finance house of India extended its market support to the tune of Rs 1,500 crore.

FORECAST: Call rates seen at 6-6.50 per cent levels on Friday.

Spot Dollar

The rupee rallied to an intra-day high of 42.64/66 as demand for dollars tapered off and improved supply. Opening the day at 42.66/68 as against its overnightclose at 42.6769, the rupee ruled steady at 42.66 levels till late noon trades. "Receiving in the forwards by exporters improved sentiment in the spot-market. This, coupled with poor corporate demand for dollars saw the rupee quote firm, and close at 42.65/67", dealers said, adding: "The market has factored in the political uncertainty, and there were no jitters on this account today". Cash/spot closed at 0.75/1.50 paise (0.25/0.50 paise) with cash/tom at 0/0.25 paise (0/0.25 paise) and tom/spot at 0.75/1.25 paise (0/0.25 paise). The Reserve Bank fixed its reference rate for the dollar at 42.67 against its Wednesday's 42.64. Meanwhile, the Euro opened the day at 46.10 (46.20) against the rupee, went to an intra-day high of 46.15 (46.26) before finishing at 46.07 (46.03).

FORECAST: Rupee seen at 42.64-42.65 on Friday.

Forward Premiums

Near term forward premiums softened on Thursday on receiving by exporters and state-run banks. Far forward, however, quoted almost firm at their overnightclosing levels. The six-month annualised forward cover closed almost unchanged at 6.83 per cent. "There was fair bit of receiving up to May. And there was hardly any importers interest," dealers said. April premiums quoted 9/10 paise (10/12 paise), May at 31/33 paise (34/36 paise) and June at 54/57 paise (57/59 paise). "Range-bound call rates also helped premiums from going higher," dealers said. In the far forwards, November premiums closed at 193/196 paise (195/198 paise), December at 222/225 paise (223/225 paise) and January at 251/254 paise (252/254 paise).

FORECAST: The six-month annualised forward cover seen at 6.78-.7.80 per cent on Friday.

Gilts

Bond prices across the board firmed up in early morning trades riding on the back of steady call rates, but fell as overnight rates sparked towards close. The 12.50 per cent 2004 was dealt sharply higher up to Rs 104.20 and was quoted at Rs 103.95-104.00 for most of the day (Rs 104-104.05). The 11.40 per cent 2000 went almost unchanged atRs 100.90-100.92 with the 11.55 per cent 2001 going a shade higher at Rs 100.15-100.20 (Rs 100.05-100.10). "Banks are opting to invest in bonds, especially short-dated ones with the looming political uncertainty," a bond dealer at a US-based bank said. Interest was also seen in the 11.98 2002 at Rs 100.15 (Rs 100.05). In the long terms bonds, the 11.99 per cent 2009 went at a premium of almost 30 paise at Rs 100.30 in morning trades, but came off to close at Rs 100.15 (Rs 100.14).

FORECAST: Short-dated bond prices to firm up on Friday.