Ruble Set for Biggest Annual Loss in 5 Years Amid Fund Transfer

Dec. 30 (Bloomberg) -- The ruble weakened, heading for its steepest annual loss in five years, as a seasonal transfer of state budget funds to commercial banks increased the supply of local currency.

The ruble depreciated 0.7 percent to 38.3490 against Bank Rossii’s target basket of dollars and euros by 3:42 p.m. in Moscow, extending its decline this year to 9.1 percent on a closing basis. Yields on Russian government bonds maturing in February 2027 rose one basis point, or 0.01 percentage point, to 7.93 percent. The yield is poised for an increase of 86 basis points this year.

The amount of money commercial banks hold in deposits with Bank Rossii increased to 1.6 trillion rubles ($49 billion), the highest level since January. 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. The MosPrime rate banks charge each other for overnight cash lending declined five basis points to 6.89 percent, retreating from its highest level in four years reached on Dec. 27.

“Budget money is pressuring both the ruble and the rates,” Vladimir Miklashevsky, a strategist at Danske Bank A/S, said in e-mailed comments.

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.

Crude oil, Russia’s main earner, fell 0.4 percent to $111.78 a barrel in London, declining for the first time in four days.

The ruble weakened 0.6 percent versus the dollar to 32.7795 and 0.8 percent against the euro to 45.1450 on the last trading day of the year.

To contact the reporter on this story: Vladimir Kuznetsov in Moscow at vkuznetsov2@bloomberg.net

To contact the editor responsible for this story: Wojciech Moskwa at wmoskwa@bloomberg.net