The Russian rouble hit a two-year high against the euro in early trade on Tuesday, before stabilising near Monday's close, in a week where tax payments are supporting the currency and investors look ahead to an expected rate cut on Friday.
The rouble had gained 0.3% to trade at 76.90 against the euro, after earlier hitting 75.95, its strongest mark since early March 2020. It was 73.04.A, a 0.1% increase against the dollar.
Trading activity remains subdued and somewhat erratic compared to levels seen before February 24 when Moscow sent tens of thousands of troops into Ukraine.
The economy faces soaring inflation, capital flight and the risk of a possible debt default after the West imposed tough sanctions on the rouble, because of the artificially limited capital controls imposed by the central bank.
Russian companies due to pay income tax on Thursday should give the rouble additional support this week, according to Promsvyazbank analysts.
The payment period for Russia's mineral extraction tax ended on Monday, which could limit upside for the rouble. Payments in April may have hit a new record, according to analysts.
Foreign currency sales by exporters could end this week after a recent easing of currency controls, and the rouble could probably come under pressure, said Sberbank CIB.
The market is looking forward to Friday's rate decision. The central bank is expected to reduce its key interest rate by 200 basis points to 15% as it tries to stimulate lending in the economy in the face of high inflation, according to a Reuters poll.
The rouble can be more vulnerable to external shocks if lower rates support the economy through cheaper lending, but it can also make the rouble more vulnerable to external shocks.
The dollar-denominated RTS index was up 3% to 969.6 points. The Russian MOEX index was 2.8% higher at 2,247, according to the rouble-based MOEX. 9 points.