CALL MONEY
Call money rates ended higher above the refinance level of seven per cent on Wednesday. The overnight interest rates opened at 6.95-7.10 per cent, unchanged from Tuesday's close. Dealers said demand for funds was steady throughout the session. "Refinance availed from the Reserve Bank of India (RBI) cushioned the rise in call rates," a primary dealer said. Dealers said liquidity was adequate, apparent from subscriptions to the repo auction of the central bank on Wednesday. The RBI said it received a single bid of Rs 1,000 crore for its 5 per cent fixed rate repo auction. The call rates ended slightly higher at 7-7.10 per cent. According to dealers, demand from banks, who wished to stay liquid ahead of the proposed bank strike led the rates to close higher. "Banks were borrowing two-day funds to cover positions ahead of the strike on Thursday," a dealer at a private bank said.
FORECAST: Call rates seen at 7-7.15 per cent on Friday.SPOT DOLLAR
The rupee crashed to a historic low of 44.07 against the dollar on Wednesday led by SBI dollar purchases. The rupee opened at 43.6775/6825, unchanged from Tuesday's close. Dealers said they expect the weakness to persist and the market to be jittery in the next few days after Wednesday's 37 paise drop. Dealers said they expect the rupee will move into a lower band around 44-44.20 per dollar over the next few days. The rupee hit an intra-day low of 44.07 per dollar, weakening sharply beyond the previous low of 43.70 hit in August 1998. "It must have been a planned move, because the pressure was building on the rupee to weaken," a dealer said. "Everything else was going against the rupee, it was boundto weaken," dealers said. The rupee ended at 44.04/06. Cash/spot ended at 0.00/0.25 paise, while cash/tom and tom/spot were not quoted as banks are shut today. The RBI fixed its rate for the dollar at 43.74 against 43.66 on Tuesday.
FORECAST: The rupee seen volatile, may calm on RBI assurance on Friday.
FORWARD PREMIUMS
Premiums ended higher on panic covering in the forward market by players on Wednesday. Dealers said there was heavy buying of forward dollars as importers and other players expected the rupee to slide further during the coming months. They expected the rupee to trade in the 44-44.20 band during the next few days. The six-month annualised premium ended at 2.40 per cent compared with Tuesday's 2.15 per cent, which was the lowest level in six years. "There was demand for forward dollars across all maturities, with most of the activity concentrated in one, three and six months. The one year premium ended at 2.70%. "The slide also spurred import hedging, driving forward dollar premia up from lows," a dealer said. May dollars ended at 3/4 paise, June at 10/11 paise, while in the far end November closed at 57/58 paise and December at 69/70 paise.
FORECAST: Premiums seen higher on Friday.
GILTS
Bonds extended morning's losses as the sudden weakening of the spot rupee against the dollar rattled the market. The Indian currency lost about 0.85% and closed at an all-time low of 44.04/06 per dollar, compared to Tuesday's close of 43.6775/6825. "Traders are concerned the weakness in the rupee can lead to tightness in short term interest rates. The six-month forward premium is already moving up. So there is selling of short term bonds," a primary dealer said. Short-term and medium term bonds fell by nearly 15-17 paise on Wednesday while long-term bonds dipped by 10 paise. The 11.75% 2001 bond ended at Rs 102.90 compared to Tuesday's close of Rs 103.07. The 9.90% 2005 security ended at Rs 100.30 compared to Tuesday close of Rs 100.44. Dealers said a rise in yields in short and medium term bonds trickled to the longer end, where bonds traded weak in evening deals.
FORECAST: Bond prices seen lower on Friday.
-- Compiled by Anurag Joshi
Copyright © 2000 Indian Express Newspapers (Bombay) Ltd.