MOSCOW - The Russian rouble strengthened to a near two-week high against the dollar on Monday, heading towards the 56 mark, boosted by a favourable tax payment period and capital controls as market players looked ahead to a central bank rate decision this week.
The rouble is set to see extra support towards the end this month as export-focused companies usually step up conversion of their forex revenues to meet local liabilities. Tax payments began last week and the bulk are due in the last week of July.
At 0752 GMT, the rouble was 1.2% stronger against the dollar at 56.48, earlier touching 56.3425, its strongest mark since July 5.
It had gained 1.5% to trade at 57.12 versus the euro , earlier hitting a two-week high of 56.97.
"There is still potential for the rouble to strengthen," said Promsvyazbank in a note, suggesting the rouble could move to the lower end of the 56-58 range against the greenback, supported by approaching tax and dividend payments.
The rouble is the world's best-performing currency so far this year, boosted by measures - including restrictions on Russian households withdrawing foreign currency savings - taken to shield Russia's financial system from Western sanctions imposed after Moscow sent troops into Ukraine on Feb. 24.
The rouble's strength has concerned officials as it dents Russia's income from exporting commodities and other goods priced in dollars and euros. Finance Minister Anton Siluanov has said Russia could turn to currency intervention.
"Currency appreciation can be restrained either by currency interventions or by increasing import opportunities," German Gref, CEO of dominant lender Sberbank, was quoted as saying by news agencies on Sunday.
The rouble may see weaker upside pressure from interest rates at home this week as the central bank is widely expected to cut its key rate from 9.5% at the July 22 board meeting after Russia posted a drop in consumer prices in June.
Veles Capital analysts said an interest rate cut on Friday was likely.
Russian stock indexes were mixed.
The dollar-denominated RTS index was up 0.9% to 1,172.3 points, at its highest since July 5. The rouble-based MOEX Russian index was 0.2% lower at 2,105.4 points.
(Reporting by Reuters)