(Updates with rouble reversing earlier gains, adds detail)
May 25 (Reuters) - The Russian rouble fell sharply past 60 to the dollar from its strongest level in more than four years in volatile trade on Wednesday and bonds rallied after the central bank announced an extraordinary board meeting.
The central bank said it will hold an off-schedule meeting on Thursday to consider the level of its key interest rate, which the market took as a signal that it will cut the rate from 14% as inflationary expectations fall and the firmer rouble holds down price growth.
At 1306 GMT, the rouble was 3.5% weaker against the dollar at 59.02, earlier falling to 60.79 from 55.80, which was its strongest mark since February 2018.
It fell 3% to trade at 60.32 versus the euro, having opened at 57.10, its strongest since May 2015.
The rouble could lose some support from tight monetary policy if the central bank cuts the key rate.
Raiffeisen Bank, CentroCreditBank and the head of the financial committee in Russia's lower house of parliament, Anatoly Aksakov, all said they expected an easing to 12% this week.
Expectations of an imminent rate cut, backed by the central bank's numerous statements that it sees room for lower rates, sparked a rally in OFZ government bonds.
Yields on 10-year OFZs, which move inversely with their prices, fell to 9.64%, the lowest since Feb. 17, from the day's high of 10.21%.
The rouble is the world's best-performing currency so far this year, supported by capital controls, new gas payment terms requiring conversion of foreign currency into roubles and a fall in imports.
The currency's strength has raised concerns about the negative impact on Russia's budget revenue from exports. On Monday, Russia cut the proportion of foreign currency revenue that exporters must convert into roubles to 50% from 80%.
Now Russian assets could encounter downside pressure from the country's possible default on state debt even though Russian officials claim there is enough money to service obligations.
The United States said on Tuesday it would not extend a key waiver, which expired on Wednesday, that had allowed Russia to pay U.S. bondholders, as Washington ramps up pressure on Moscow over its actions in Ukraine.
Russia's dollar-denominated RTS stock index fell 2.7% to 1,239.5 points. The rouble-based MOEX Russian index rose 1.4% to 2,324.6 points. (Reporting by Reuters; Editing by Kirsten Donovan)