Russian rouble leaps to more than 2-week high against US dollar

The rouble surged to more than two-week highs on Thursday against the dollar and euro and Russian stocks edged higher, helped by stronger oil prices and an upcoming tax period that usually boosts rouble demand.

By 1015 GMT, the rouble was 2% stronger against the dollar at 59.52, its firmest point since Aug. 2. Earlier it had gained 2.2% to 60.30 against the euro , its strongest since late July.

The rouble should continue strengthening on Thursday, said SberCIB Investment Research in a note, pointing to month-end tax payments that usually prompt export-focused companies to convert part of their foreign currency revenue.

“With tax payment deadlines fast approaching, Russian exporters will be ramping up their hard currency sales,” SberCIB said.

Propped up by capital controls, the rouble has become the world’s best-performing currency this year.

Rouble volatility has subsided after wild swings which saw it hit a record low of 121.53 to the dollar on the Moscow Exchange in March, days after Russia sent tens of thousands of troops into Ukraine on Feb. 24, and then rally to a seven-year peak of 50.01 in June.

On the bond market, yields on two-year OFZ treasury bonds, which move inversely with prices, touched a more than one-week low of 8.90%, before edging back to Wednesday’s close of 9.01% .

Data late on Wednesday showed consumer prices in Russia dipped for the sixth straight week.

“If this trend doesn’t reverse in September, we might see a further rate cut at the CBR’s next meeting,” BCS Global Markets said in a note.

The central bank last cut its key interest rate to 8% in July and said it would study the need for more cuts as inflation slows and an economic contraction continues for longer than previously thought. read more

Rate cuts boost bond prices and ease upside pressure on the rouble by making deposits less attractive, while supporting the stock market as investors seek more high-yielding assets to park their funds.

The dollar-denominated RTS index (.IRTS) was up 2% at 1,159.2 points. The rouble-based MOEX Russian index was 0.1% higher at 2,190.4 points.

Brent crude oil , a global benchmark for Russia’s main export, was up 1.4% at $95.0 a barrel.