Oct. 30 (Bloomberg) -- Russia's ruble rose against the dollar and the euro as speculation the government will devalue the currency waned.

The ruble climbed to near the highest level in almost two weeks against the dollar, paring the year's decline to 9 percent. Officials have dismissed banks' forecasts of a devaluation since Friday, saying Russia has sufficient reserves to support the ruble. Urals crude, the main export, fell below $70 a barrel for the first time in a year on Oct. 15. An average price at that level is needed for a balanced budget in 2009.

``They've given reassurance to the markets and that's why the ruble's strengthened,'' said Yefim Pavlotskiy, deputy director-general in Moscow at Trinfico Group, which manages $1.3 billion in Russian assets. ``The public and business circle know they're poised to use the war chest they've accumulated over the past months to support the ruble.''

The currency, which policy makers manage against a euro- dollar basket to protect the competitiveness of exporters, rose 0.2 percent to 26.7831 per dollar by 5:05 p.m. in Moscow, from 26.8226 yesterday. It also gained 0.2 percent to 34.6799 per euro, snapping a two-day decline.

These movements left the ruble 0.2 percent stronger at 30.3422 against the basket at the end of official trading at 5 p.m. in Moscow. The basket rate is calculated by multiplying the ruble's rate to the dollar by 0.55, the euro rate by 0.45, then adding them together.

Currency Bets

Bank Rossii, Russia's central bank, keeps the ruble within a trading band against the basket by buying and selling foreign- currency reserves.

Three-month non-deliverable forward contracts, used by traders to speculate on the currency, had the ruble at 28.82 per dollar today, up from a 5 1/2-year low of 31.35 two days ago. NDFs are contracts used to fix a currency at a particular level at a future date. They are employed by companies seeking to protect against foreign-exchange fluctuations.

Ruble devaluation ``won't happen,'' Arkady Dvorkovich, an aide to President Dmitry Medvedev, said at a conference in Moscow yesterday. ``The central bank has enough reserves to ensure smooth dynamics of the exchange rate,'' he said.

Finance Minister Alexei Kudrin refuted forecasts of depreciation last week, saying the nation's foreign-currency reserves will help support the ruble. He said speculators would be ``disappointed'' if they bet on the ruble's depreciation.

Reserves Shrink

Russia's international reserves fell $31 billion last week, the biggest decline this year, to $484.7 billion, Bank Rossii said today. About $15 billion of that drop was from currency sales to support the ruble and to prevent it from weakening beyond 30.40 versus the basket, according to Evgeniy Nadorshin, a senior economist in Moscow at Trust Investment Bank.

The level is regarded by most analysts, including those at Credit Suisse Group, BNP Paribas SA and Citigroup Inc., as the weakest end of the basket trading band. The bank has sold about $2.9 billion this week to support the currency, according to Moscow's MDM Bank.

Bank Rossii today stopped offering currency swaps as it tries to deter speculation. Traders use the swaps to bet on the exchange rate without having to sell rubles upfront. It has been setting limits on such trading since Oct. 20.

The swaps decision shows the bank is ``clearly in the mood to take no prisoners and hammer home the message that the ruble will be defended,'' Chris Weafer, chief strategist at UralSib Financial Corp. in Moscow, wrote in an e-mail to clients.

Bank Forecasts

Banks including Citigroup predict the ruble will lose 5 percent against the central bank's dollar-euro basket in the next year as lower oil prices erode the current-account surplus.

Russian government bonds surged. The benchmark 7.5 percent dollar-denominated security maturing in 2030 yielded 9.88 percent, down 153 basis points, the biggest one-day yield decline since it was issued in 2000.

``Russian sovereign debt continues to recover,'' said Sebastien De Prinsac, head of international sales at Trust.

The yield on the 8.25 percent note due 2010 fell 33 basis points to 6.91 percent, and the Micex index of Russian corporate debt was little changed. Bond yields move inversely to prices.

To contact the reporter on this story: Emma O'Brien in Moscow at eobrien6@bloomberg.net

Last Updated: October 30, 2008 11:37 EDT