MOSCOW: The rouble recorded its biggest weekly gain since 2009 versus the dollar, propped up by liquidity strains fuelled by tax payments and improved risk appetite after Thursday's agreement on measures to contain the euro zone debt crisis.
Tight liquidity since September has pushed inter-bank overnight lending rates above 5.0 percent from around 3.5 percent, prompting some lenders to sell foreign currencies for roubles instead of borrowing from other banks.
Export-focused firms also helped the rouble by converting dollars and euros to pay income tax, which was due by the end of the day and totalled around 190 billion roubles ($6.34 billion), according to analysts' estimates.
The rouble firmed 0.6 percent to 39.77 versus the dollar by 1411 GMT, taking gains since last Friday's closing to 4.0 percent, its best result since mid-February, 2009.
Friday's decision by the central bank to leave all key rates unchanged had been broadly priced in, as the markets expected the bank would not make any changes to its monetary policy.
"The market had expected such a decision from the central bank and the rouble's firming, which resumed after the central bank statement, was mainly caused by improving conditions on global markets and falling prices for US Treasuries," said Denis Korshilov, chief dealer at Citi in Moscow.
Versus the euro, the rouble strengthened 0.5 percent to 42.19. It gained 0.55 percent to 35.34 versus the euro-dollar baskets, hovering in the free-float range of 34.70-35.70 within which the central bank does not carry out forex interventions.
"Under current conditions the basket could continue sliding to the level where the central bank is expected to step in with interventions, buying foreign currencies," said Stanislav Yarushevichus, chief dealer at ING in Moscow.
The euro zone deal also boosted the Russian stock market, which, however, pared gains on Moscow's Friday afternoon on investors' intentions to lock in profits before the weekend.
"When the market climbs so high where farther could it go? There is no more news capable of moving prices higher. Meanwhile the upside trend is rather strong and it would be difficult to reverse it swiftly," said Andrey Yarnykh, a trader at UBS in Moscow.
The rouble-traded MICEX index was up 0.1 percent at 1,526.50 after rising to 1,552 points and the dollar-based RTS was up 1.0 percent at 1,608.42, off from Friday peaks at around 1,628.3.
The EFPR data showed funds investing in Russia saw a net inflow of around $11 million in the latest week after 15 straight weeks of outflows.
"A very modest sum for sure, but that is only the second aggregate positive fund flow week for Russia out of the past 25 weeks and extends a recent pattern that points to more positive momentum building across all Russia-exposed categories," Troika Dialog strategist Chris Weafer said in a note.
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