Ruble Gains 1.9% Versus Basket

The ruble gained a record 1.9 percent versus a euro/dollar basket on Wednesday, boosted by liquidity constraints and turning its back on a period of virtually daily devaluations.

Central Bank efforts to draw a line under the ruble's fall appear to be working -- the ruble closed at 39.77 to the basket Wednesday, up a record 1.9 percent and moving further away from the 41 boundary of its trading band.

"The market is playing on a theme of a strengthening ruble and the [Central Bank] warnings that ruble liquidity will be reduced," said Viktor Kholoshnoy, trader at Gazprombank.

Wednesday's jump in the ruble was the biggest since the current composition of the basket -- at 0.45 euros and 0.55 dollars -- was set two years ago. Before embarking on gradual ruble depreciation, the Central Bank had been allowing only gradual appreciation in steps of around 10 kopeks at a time.

Illustrating the demand for rubles, bids at Wednesday's two one-day repo auctions topped 250 billion rubles ($7.1 million), while the Central Bank allocated 153 billion.

Russia's monetary base fell to 3.8 trillion rubles as of Feb. 2, its smallest since late 2007, weekly data show.

"A shrinking money base supports our expectations that devaluation of the ruble is over, at least for the next several months, as it creates a shortage of the domestic liquidity necessary for a further run on the ruble," UniCredit said.