World Economy

Russia Spends $13b to Prop Up Ruble

Russia Spends $13b to Prop Up Ruble
Russia Spends $13b to Prop Up Ruble

Russian currency-market interventions that have topped $13 billion are failing to stem the ruble’s slide to unprecedented lows as oil trades near the weakest in four years.

The Bank of Russia raised its dollar-euro basket band by 30 kopeks to 46.25 Thursday as falling crude and concern of global growth will slow the weakened ruble 1 percent, Bloomberg said.

The central bank has spent about $13 billion to shore up the currency based on the trading-band shift and interventions of $1.77 billion on Oct. 15, according to data on its website Friday.

Brent crude has tumbled 23 percent from a June peak, worsening the outlook for Russia, which derives more than half of its budget revenue from energy and is teetering on the brink of recession as sanctions over the Ukraine crisis spur a domestic dollar shortage. Policy makers have stepped up efforts to buttress the ruble, with the central bank announcing on Thursday that it will offer as much as $3.5 billion of foreign currency repurchase agreements at debut auctions this month.

“The size of the announced offering was lower than what’s needed,” Aram Kazaryan, a foreign exchange trader at MDM Bank in Moscow, said by e-mail. “It’s still easier for banks to buy the dollar on the spot market rather than borrow from the central bank.”

The currency depreciated 0.1 percent to 40.9140 per dollar at 2:29 pm in Moscow. It weakened 0.2 percent to 46.0912 against the basket, headed for a 2.2 percent loss in the week. Brent crude for December settlement erased a decline of as much as 0.4 percent to trade up 1.5 percent at $87.10 per barrel in London.

 Free-Float Plan

The world’s biggest energy exporter is eating into its $451.7 billion reserves to slow a depreciation that’s made the ruble the world’s worst performer in the past three months. The repo program, which has a $50 billion ceiling and runs through 2016, comes as the Finance Ministry plans to provide $3 billion of liquidity in the form of foreign-currency deposit auctions.

Funding conditions for Russian companies are worsening as they face $55 billion of debt maturities this year, central bank estimates show. The rate on the three-year ruble-dollar basis swap reached minus 300.5 basis points on Oct. 10, signaling traders are willing to pay a record premium for dollars. The rate was minus 281 on Friday.

“Any speculator, any banker playing professionally on the currency market, knows that the peak external debt payments come in the fourth quarter, and that no-one will refinance this debt,” Vladimir Tsuprov, chief investment officer of TKB BNP Paribas, said at a conference in Moscow. “And obviously, they bet aggressively on the ruble’s decline.”