Ruble Rallies Second Day as Russia Tax Deadline Boosts Demand

The ruble rallied as companies sold dollars to pay local taxes, shoring up the currency for a second day after China signaled it’s prepared to offer Russia support to tackle the worsening economic slump. The ruble strengthened 5.5 percent to 55.4995 a dollar by 2:52 p.m. in Moscow, bringing its two-day appreciation to 11 percent. The yield on 10-year government bonds fell 44 basis points to 13.16 percent, while the dollar-denominated RTS Index of equities climbed for a fourth day. Corporate tax payments that Bank of America Corp. estimates will amount to 500 billion rubles ($8.8 billion) are bolstering the ruble as last week’s interest-rate increase to 17 percent squeezes money-market funding. Two Chinese ministers offered support for President Vladimir Putin as Russia’s highest borrowing costs in 11 years choke an economy already facing a deepening slowdown due to sanctions over Ukraine and low oil prices. “Our official forecast is still 48 rubles per dollar by the end of the year and we still stand by it,” Vladimir Osakovskiy, the chief economist for Russia at Bank of America in Moscow, said by e-mail. “There are clearly plenty of risks, including potential for escalation of the Ukraine crisis, the risk of capital controls, further oil price moves and so on.” China’s Commerce Minister suggested that expanding a currency swap agreement and increasing the use of yuan in bilateral trade would have the greatest impact in aiding Russia, according to a Dec. 20 report by Hong Kong-based Phoenix TV. China is ready to help and is confident Russia can overcome its economic difficulties, Foreign Minister Wang Yi was cited as saying. The countries signed a three-year currency-swap line of 150 billion yuan ($24 billion) in October. By Vladimir Kuznetsov

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