Call rates held firm at 10 per cent levels on Thursday. Opening the day at 9.90-10.10 per cent, unchanged from its previous close, call rates were seen at these levels for most the day. "Demand for funds from banks is poor. Sentiment is towards softer call rates in the week ahead with primary dealers expected to square off their additional refinance at 10 per cent", a dealer with a US-based bank said. Interest inflows of around 800 crore are due on the 12.40 per cent 2013 and 9.50 per cent 2008 on Friday. This, however, will be off set by outflows of Rs 600 crore on the same day as a result of the 10-year state loan auctions for Andhra Pradesh and Tamil Nadu. Most of the deals today were struck in the 9.95-10 per cent range. RBI did not receive any response at its four-day repos. NSE pegged its overnight Mibid and Mibor at 9.88 per cent (9.87 per cent) and 9.98 per cent (10.01 per cent) with the fortnightly one at 9.38 per cent (9.38 per cent) and 10.12 per cent (10.18 percent).

FORECAST: Call rates may go higher to 10.20-10.30 per cent levels on Friday.

Spot Dollar

The rupee closed lower at 43.48/49 against the dollar on Thursday. Opening the day at lower at 43.43/45 from its overnight close at 43.42/43, the rupee went to an intra-day low of 43.48/49 on demand for dollar from both corporates and banks. The rupee's close today is its lowest for 1999. "There was dollar demand from state-run corporates and banks. There are also rumours that the US may impose a fresh round of sanctions", a dealer said. SBI was seen buying dollars in early trades today. The rupee touched a 12-month intra-day low of 43.585 last Monday before recovering on the back of SBI's dollar sales. "The rupee hit its all-time low of 43.70 hit on 20 August '98. We could see the rupee under pressure on Friday", Mecklai Financial Services' senior vice-president, KN Dey, said. Cash/spot quoted at 2.25/2.50 paise (1/1.25 paise) with cash/tom unchanged at 0.50/0.6250 paise and tom/spot at 1.75/2paise (0.50/0.6250 paise). RBI pegged its reference rate for the dollar at 43.47 as against it previous 43.42. The euro opened at 45.60 (45.54) against the rupee, went to a high of 45.84 (45.80) before closing at 45.69 (45.64).

FORECAST: Rupee seen testing 43.52-43.55 levels on Friday.

Forward Premiums

Forward premiums closed higher on Friday. The six-month annualised forward cover finished at 4.90 per cent (4.74 per cent). "There was not much of corporate interest for dollars. Premiums inched higher more on account of a weaker spot rupee at 43.48/49 levels and inter-bank paying", a dealer with a brokerage said. January dollars quoted at 98/96 paise (93/95 paise) with February at 110/112 paise (108/110 paise). "Premiums are expected to inch up on Friday. Outflows from the state-loan auction, a weaker spot-rupee expected to test 43.55 levels all point towards premiums going higher", dealers said. The Sensex went up by 84 points to 4,705 on Wednesday, but lost 75 points on Thursday to closeat 4,630. FIIs have sold a net amount of $78 million during August.

FORECAST: Six-month annualised forward cover seen a shade over 5 per cent on Friday.

Gilts

Bond prices were rangebound on Thurday. The 12.40 per cent 2013 was dealt at Rs 103.53 (Rs 103.52) with the 12.50 per cent 2004 at Rs 105.49 (Rs 105.48). "The market is cautious and is keeping a close eye on call rates", a dealer with a primary dealership said. Interest inflows of around 800 crore are due on the 12.4 per cent 2013 and 9.5 per cent 2008 on Friday, but this will be set off by outflows of Rs 600 crore on the same day as a result of the 10-year state loan auctions for Andhra Pradesh and Tamil Nadu. The 11.99 per cent 2009 was seen at Rs 102.66 with the 12.50 per cent 2004 at Rs 105.50). Call rates are seen softening next week, but dealers said that selling pressure may come through if call rates were to go higher. Overnight rates finished on Thursday at 9.90-10 per cent levels.

FORECAST: Bond prices seen dippingon Friday.