Azernews.Az

By Bloomberg

Russia is offering the least short- term loans to banks in a month as policy makers seek to curtail access to cash used to speculate on further drops in the ruble.

The Bank of Russia will auction 2.695 trillion ($58 billion) of seven-day repurchase agreements, which give lenders access to funds for a week at a minimum 9.5 percent. That’s 8 percent less than was offered two weeks ago, when the central bank held its biggest transaction since July. The ruble declined 1.8 percent to 46.7050 per dollar at 1:19 p.m. in Moscow.

Russian central bank Governor Elvira Nabiullina is trying to stop speculators from spurring further declines in a currency she said yesterday was “strongly undervalued” following a 30 percent slide this year. Her comments triggered the best day this month for the ruble, which rallied 1.7 percent after she announced plans to limit local-currency liquidity used “for games on the currency markets.” The ruble slid today as oil, a key export earner for Russia, fell to a four-year low in London.

“The central bank, by lowering the supply of rubles, forces speculators to close long positions in the dollar and euro,” Oleg Popov, who helps oversee $1 billion at Allianz Investments in Moscow, said by e-mail. “The central bank’s main task currently is stopping the ruble’s devaluation which lately turned into a real slump. To do that, the central bank artificially creates a ruble deficit.”

The central bank controls local-currency funding with one- day and seven-day repos, secured with bonds and other collateral. The risk of cutting funding would be that the central bank worsens a cash crunch already facing lenders due to U.S. and European sanctions over the conflict in Ukraine.

Retail loan growth is at three-year lows, while the economy of the world’s largest energy exporter is on the verge of recession. The MosPrime rate, which reflects what banks charge each other for overnight funds, rose four basis points to 10.22 percent today, 26 basis points below a five-year high.

Bank of Russia doesn’t plan sharp limits on ruble liquidity, Alexei Simanovsky, the first deputy governor, said today at a meeting with bankers in Moscow.