Rouble near 4-week high on tax duties, liquidity strain

By 0745 GMT, the rouble firmed 0.7 percent to 31.04, its strongest level since Sept. 19, extending the distance from 32.90 hit earlier this month, its weakest level since August, 2009.

Against the euro, the rouble had added 0.3 percent to 42.67 and gained 0.5 percent to 36.28 versus the euro-dollar baskets the central bank's main gauge of the currency market.

The market is "jumping the gun when selling foreign currencies... on expectations that banks' clients will be selling dollars before tax payments," said a dealer at a Russian bank.

Export-focused companies usually step up conversion of dollars and euros in the second half of every month.

Insurance premium payments, due by Oct. 18, and payments of value-added tax no later than by Oct. 20 will withdraw around 550 billion roubles ($17.6 billion), according to Dmitry Kharlampiev, analyst at Petrocommercebank.

Tax payments will also affect already strained liquidity and could push overnight interbank lending rates above 5.0 percent.

"Tight rouble supply locally helps - it may make more sense for some FX cash rich companies to convert dollars into roubles rather than borrow roubles expensively," analysts at Nordea said in a note.

The market will be closely watching euro zone inflation data and US data on producer prices and retail sales for clues of the health of the world's leading economies.

Analysts at Zerich said in a note that "bears urgently need new arguments to sell" and the market is poised to rise on Friday, although the external background remains "contradictory".

The rouble-traded MICEX index was up 0.5 percent and the dollar-based RTS was adding 0.9 percent, heading away from 2011 lows hit in early October.

Copyright Reuters, 2011

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