Azernews.Az

By Bloomberg

The ruble fell to a record as Bank of Russia shifted its currency band by the most since 2012 amid concern Standard & Poor's will cut the country's credit rating to junk.

The central bank raised the corridor against its target dollar-euro basket by 40 kopeks yesterday, according to a statement on its website. The ruble weakened 0.4 percent versus the basket to 46.8826 as of 11:21 a.m. in Moscow after a 0.8 percent drop yesterday. The yield on Russia's 10-year government bonds rose one basis point to 9.88 percent, the highest in more than a week.

The monetary authority has spent more than $16 billion in October to slow the world's worst depreciation in the last three months after U.S. and European Union sanctions over Ukraine triggered a dollar shortage.

S&P is due to announce its decision on Russia's credit score today, a week after Moody's Investors Service cut the sovereign one level to its second-lowest investment grade, citing concern sanctions over Ukraine will hurt the economy. The ratings company currently ranks Russia BBB-, one step above junk.

"Foreigners will be selling the ruble today on concern of an S&P downgrade," Iskander Abdullaev, a Sberbank CIB analyst in Moscow, said by phone. While a rating cut is "unlikely," the possibility is adding "volatility to the dollar-ruble pair among speculators."

The Bank of Russia resumed interventions this month for the first time since May as sanctions drove the premium traders are willing to pay for dollars to near-record levels. The central bank probably spent about $2.6 billion from its reserves yesterday supporting the ruble, Abdullaev said.

Reserves Slump

Brent crude retreated 0.4 percent to $86.47 per barrel today in London after sinking to a four-year low last week. Oil and natural gas provide about 50 percent of Russia's budget revenue.

Currency sales this month contributed to a $7.9 billion drop in Russia's foreign reserves, the second-biggest cash pile in Europe, according to data for the week through Oct. 17. Moody's analyst Kristin Lindow cited Russia's "subdued" growth prospects and the "ongoing erosion" of its reserves for the cut last week.

Almost half the time, government bond yields fall when a rating action suggests they should climb, or they increase even as a change signals a decline, according to data compiled by Bloomberg on 314 upgrades, downgrades and outlook changes going back as far as 38 years. The rates moved in the opposite direction 47 percent of the time for Moody's and for S&P. The data measured yields after a month relative to U.S. Treasury debt, the global benchmark.