Overnight rates went to an intra-day high of 12.25 per cent on Tuesday. Opening the day 11.30-11.50 from its Friday's finish at 10-10.20 per cent, call rates ruled firmer on borrowing ahead of reporting Friday, and changed sentiment on account of the upcoming auctions. "There was good demand for funds. It appears some banks may have covered less last week as they wanted to avoid showing higher borrowings in the half-yearly books", a dealer with a Gulf-based bank said. The Reserve had on Monday announced the auction of the 11.90 per cent 2007 for Rs 3,000 crore and 12.60 per cent 2018 for Rs 2,000 crore for 7 October. "Payout will be reporting Friday, and nobody wants to be caught short", a dealer said. The RBI received no bids at its three-day 6 per cent fixed rate repo auction held today on account of the firm call rates. Auction outflows will be partially off-set by inflows of Rs 2,000 crore by way of interest payments on cash reserve ratio balances towards the later part of the week. Most of the deals werestruck at 11.75-12.00 per cent levels. At close of trades today, call rates were seen at 11.45-11.50 per cent.

FORECAST: Call rates seen at 11.90-12.20 per cent levels on Wedneday.

SPOT DOLLAR

The rupee held firm against the dollars on Tuesday in dull trades. Opening the day 43.59/5970, little changed from its overnight close at 43.5950/60, the rupee moved in a narrow 1 to 2 paise band throughout the day. "Corporate interest for dollars is poor. They are uncertain with poll results just around the corner", a dealer with a brokerage said. Trades were largely inter-bank. A few foreign banks were seen bidding for dollars. "The amounts were small and was more than matched by dollar inflows", a dealer with a US-based bank said. The State Bank put a sell-quote of 43.5950 for the dollar, and this stopped any potential slide in the rupee. At close, the rupee was seen at 43.5875/5925. Cash/tom was quoted 0.75/0.8750 paise (0.50/1 paise), cash/spot at 1.75/2 paise (1.75/2 paise) with tom/spot at 0.75/0.8750 paise (0.50/1 paise). The Reserve Bank pegged its reference rate for the dollar at 43.59 as against Monday's 43.58. The rupee opened at 46.78 (46.94) against the Euro, which was also its day's high 46.85(46.92) to finally close at 46.56 (46.85).

FORECAST: Rupee seen holding 43.5950/60 levels on Wednesday.

FORWARD PREMIUMS

Forward premiums inched up across-the-board intra-day trades, but finished nearer to their overnight quotes on Tuesday. The one-month annualised forward cover closed at 6.34 per cent (5.84 per cent), six-months at 5.78 per cent (5.72 per cent) with the one-year at 5.76 per cent (5.72 per cent). "There was some receiving by exporters. A few state-run banks also sold dollars", a dealer with a brokerage said, adding: "Premiums are basically tracking higher call rates at 12 per cent above ahead of the twin-bond auction". The Reserve had on Monday announced the auction of the 11.90 per cent 2007 for Rs 3,000 crore and 12.60 per cent 2018 for Rs 2,000 crore for October 7. October premiums finished at 17/18 paise, and in the far terms, April dollars quoted at 143/144 paise and May at 164/165 paise. "Importer interest is evident, but they are not finding the current levels attractive. There is feeling that premiums may come post-election. A cut in the cash reserve ratio is doing the round of the rumour mills", adealer with a British bank said.

FORECAST: Six-month annualised forward cover seen at 5.75 per cent levels on Wednesday.

GILTS

Bearish trends continued to prevail in the gilts market on Tuesday. The 11.90 per cent 2007 was quoted at 102.85/88 in later day trades after opening at around Rs 102.90 with the 12.50 per cent 2004 at Rs 105.25-105.30, down from the morning's Rs 105.28. "Higher call rates at 12 per cent and above on account of the upcoming auction of the 11.90 per cent 2007 and 12.60 per cent 2018 for Rs 3,000 crore and Rs 2,000 crore respectively on October 7 has affected trades... bond trades were also lacklustre", a dealer said. The RBI is expected keep the market liquid. "There is feeling that the central bank may intervene through state-run banks in the forwards... but it will be just so that the auction sails through as the central bank would not like any turbulence in the spot-rupee", a dealer with a European bank said. Interest payment of Rs 2,000 crore on cash reserve ratio balances towards close of fortnight is also seen partially improving liquidity.

FORECAST: Bearish trend to continue; gilts prices could extend losses on Wednesday.

Compiled by Raghu Mohan