May 19 (Reuters) - The Russian rouble firmed past 63 against the dollar on Thursday, propped up by capital controls as well as looming tax payments that usually require extra conversion of foreign currency to roubles to meet local liabilities.
The rouble has become the best-performing currency http://fingfx.thomsonreuters.com/gfx/rngs/GLOBAL-CURRENCIES-PERFORMANCE/0100301V041/index.html this year despite a full-scale economic crisis, artificially supported by controls that Russia imposed in late February to shield its financial sector after it sent tens of thousands of troops into Ukraine.
At 0749 GMT, the rouble was up 0.8% at 62.95 to the dollar on the Moscow Exchange, closing in on levels previously seen in early 2020.
Against the euro, the rouble firmed 1.5% to 65.70 after a second-long move to 61.1075 at the market opening, which was likely caused by a trading error and became the rouble's strongest point since April 2017.
The rouble is steered by the requirement for export-focused companies to convert 80% of their revenues, while demand for dollars and euros is limited by capital controls and a drop in imports due to disrupted logistics in the aftermath of sanctions.
On the bond market, yields on 10-year OFZ treasury bonds inched lower to 10.28% from levels around 10.30% seen earlier this week.
Yields, which move inversely with bond prices, are expected to go further down as the central bank is set to cut its key rate this year to prop up the economy and as inflation slows thanks to the firming rouble.
The central bank is likely to cut its key rate by 100-200 basis points from 14% at its next board meeting in June, said Dmitry Polevoy, head of investment at LockoInvest.
For the first time in many weeks, annual inflation slowed, to 17.69% as of May 13 from 17.77% a week earlier, while the weekly inflation reading slipped to 0.12%, well below the 2.22% reading seen in early March days after Russia started what it calls "a special military operation" in Ukraine.
Stock indexes were mixed. The dollar-denominated RTS index was 0.1% higher at 1,213.7 points. The rouble-based MOEX Russian index shed 0.9% to 2,423.8 points.
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(Reporting by Reuters; Editing by Nick Macfie)