I encountered the same error and the work around does not work for me.

ra...@rp$ echo $SSH_AUTH_SOCK

ra...@rp$  
ra...@rpr$ svn update
Password for 'login' GNOME keyring: 
svn: OPTIONS of 'https://example.com/svn/repo': authorization failed: Could not 
authenticate to server: rejected Basic challenge (https://example.com)

I tried both : entering correct password (no capslock) and just typing
error.

Is this an svn bug in that it is not handling interaction with keyring
properly?

Sorry for the rant but : why is such a restriction is added without me
opting in? I never entered any keyring password or explicitly did
anything with keyring. This is painful for even for fairly experienced
users (but no experience with keyring of course), I wonder how painful
it would be for average users.

-- 
gnome-keyring demands unspecified password, breaking svn commits
https://bugs.launchpad.net/bugs/473139
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