Call rates ruled firm above 10 per cent on Wednesday. Opening the day at 10-10.25 per cent from its overnight close at 9.75-10 per cent, call rates held these levels in early trades. "The state-loan auction for Rs 3,259.08 crore on September 8 has hightened fears that call rates could firm up", a dealer with a US-based bank said. The state-loan auction comes on the heels of outflows of Rs 2,500 crore from Friday's auction of the 11.99 per cent 2009, and aggressive Reserve Bank OMO to ease the pressure on the rupee by sucking out liquidity. Inflows of Rs 2,500 crore are due this fortnight with about Rs 1,500 crore coming in the first half. The biggest inflow is on 2 September for Rs 1,000 crore with the redemption of the 13.12 per cent 1999. "The state-loan auction will neutralise these inflows", a dealer said, adding: "Call rates are seen holding 10 per cent levels as the state-loan auction comes ahead of the next reporting date of September 10. There are also advance tax outflows later inthe month". Most of the trades today were struck at 10.15 levels. At close, call rates were seen lower at 9.50-9.75 per cent.

FORECAST: Call rates seen at 10.15 per cent levels on Thursday.

SPOT DOLLAR

The rupee held firm against the dollar on Wednesday in dull trades. Opening the day at 43.4750/4850, unchanged from its overnight close, the rupee ruled in a narrow band between 43.4750 and 43.49 throughout the day. "Trades were nominal. The bigger corporates stayed away from doing business", a dealer with a Gulf-based bank said, adding: "The market has taken a cue from the prevailing firm call rates. It is now believed that the Reserve Bank wants call rates a shade firm to keep the spot-rupee stable". State-run banks have been buying dollars to keep the rupee from firming. "All these point towards a firm spot-rupee till after the elections", a dealer with a European bank said. At close of trades, the rupee was seen at 43.4825/49. Cash/spot was quoted unchanged at 1.25/1.50 paise, cash/tomat 0.50/0.6250 (0.50/0.75 paise) with tom/spot also at 0.50/0.6250 paise (0.50/0.75 paise). The Reserve Bank fixed its reference rate for the dollar at 43.47 as against its previous 43.48. The euro opened at 45.93 (45.64) against the rupee, went to a high of 46.24 (45.99) before closing at 46.15 (45.96).

FORECAST: Rupee seen between 43.4850/4950 levels on Thursday.

FORWARDS PREMIUMS

Forward premiums firmed up a shade on Wednesday. The six-month annualised forward cover was seen 5.40 per cent (5.26 per cent). January dollars quoted at 96/98 paise (93/94 paise) with February at 116/118 paise (112/114 paise). "The six-month annualised at 5.40 per cent is rather high. There is paying interest. It is, however, call rates that is playing a big role in pushing premiums up", a dealer with a brokerage said. The state-loan auction for Rs 3,259.08 crore on September 8 has hightened fears that call rates could firm up. The auction follows outflows of Rs 2,500 crore from Friday's auction of the 11.99per cent 2009. FIIs have turned buyers over the past few days. FII were net sellers of over $50 million in August, but have invested close to a $1 billion between April-July'99. "Premiums inched in late-noon trades tracking a slightly lower rupee at 43.4825/49 from opening levels of 43.4750/48", a dealer with a European bank said.

FORECAST: Six-month annualised forward cover at 5.35 per cent on Thursday.

GILTS

Bond prices fell on Wednesday. The 11.99 per cent 2009 was dealt at Rs 102.10 (Rs 102.24). The 12.50 per cent 2004 was dealt at Rs 105.15 (Rs 105.30) with the the 11.50 per cent 2004 at Rs 101.70 (101.78 levels). "The state-loan auction for Rs 3,259.08 crore on September 8 has hightened fears that call rates could firm up, and bond prices reacted accordingly", a bond dealer with a primary dealership said, adding: "Trading volumes are thin and the undertone is fairly bearish". Outflows of Rs 2,500 crore from Reserve Bank's auction of the 11.99 per cent 2009 on Friday pushed call ratesto 9.50 per cent levels, and bond prices have reflected a bearish undertone since. The Reserve Bank's OMO has also affected trading sentiment. The 11.40 per cent 2000 was put on the sale window at Rs 101.15, the 11.75 per cent 2006 at 102.66 and the 12.30 per cent 2016 at 102.60.

FORECAST: Bond prices seen going lower on Thursday.

Compiled by Raghu Mohan