The ruble slid, taking its annual loss to the steepest in five years, as a seasonal transfer of budget funds increased the supply of Russia’s currency and as slowing economic growth compounded capital-outflow woes.
The ruble weakened 0.9 percent to 38.4213 against Bank Rossii’s target basket of dollars and euros by 6 p.m. in Moscow, extending its depreciation this year to 9.3 percent on a closing basis. Yields on Russian government bonds maturing in February 2027 fell two basis points, or 0.02 percentage point, to 7.90 percent, cutting the rise in 2013 to 83 basis points.
The amount of money lenders have access to via deposits with Bank Rossii increased to 1.6 trillion rubles ($49 billion), the highest since January, and the MosPrime rate banks charge each other for overnight lending fell five basis points to 6.89 percent. The government may have “pumped” as much as 200 billion rubles into the system on Dec. 27, VTB Capital analysts Maxim Korovin and Anton Nikitin said in an e-mailed note.
“Budget money is pressuring both the ruble and the rates,” Vladimir Miklashevsky, a strategist at Danske Bank A/S, said in e-mailed comments.
In 2012, the overnight MosPrime rate contracted from 6.56 percent on December 24 to 5.18 percent on January 15.
Every year, the government distributes unspent funds at the end of December and the beginning of January, resulting in a drop in money-market rates and causing a reaction in the currency market, according to Miklashevsky.
Finance Minister Anton Siluanov said Dec. 23 the budget deficit this year is expected to be in a range of 0.5 percent to 0.6 percent of gross domestic product. This compares with an earlier estimate of a surplus of 599.9 billion rubles for the first 11 months, according to the ministry’s data posted on its website Dec. 12.
Russia’s economic growth slowed to the weakest level in almost four years, declining to 1.2 percent of GDP in the third quarter.
Net capital outflow in the first nine months was $48 billion, compared with $46 billion in 2012, according to the central bank data on Bloomberg. Central bank Chairman Elvira Nabiullina said on Dec. 18 “dubious operations” took about $22 billion out of the country.
“These outflows have undermined the ruble,” Mikhail Palei, a currency trader at VTB Capital in Moscow, said by phone.
Two bombings at a train station and on a trolleybus killed at least 30 people within 24 hours in the southern city of Volgograd, less than six weeks before Russia hosts the Winter Olympics, investigators said today.
“It’s the end of the year, and it won’t make investors shake their positions,” Danske’s Miklashevsky said. “However, if there follows a strong reaction from authorities, it may move the markets after they re-open in January.”
Today is the last day of ruble trading at Moscow Exchange, which will be closed for business on all days until Jan. 7 except for Jan. 6, when it will be open. The exchange will re-open from Jan. 8.
Crude oil, Russia’s main earner, fell 0.8 percent to $111.34 a barrel in London, declining for the first time in four days and trimming its gain this year to 7 percent.
The ruble weakened 0.7 percent versus the dollar to 32.8265 and 1.1 percent against the euro to 45.2800.
“I wouldn’t over-dramatize today’s moves. The liquidity is very low, and every move becomes a spike,” VTB’s Palei said.
Russia’s current-account surplus, the difference between exported and imported goods and services, has more than halved in the nine months through September to $29.5 billion, according to the central bank data on Bloomberg.
“As a result, we’re fully open to foreigners’ flows, and the foreigners didn’t like emerging markets this year,” Palei said.