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RUB Recovers to 77 vs USD with Eye on Russia-West Talks

MOSCOW, Feb 1 (Reuters) - The Russian rouble firmed to the 77 area versus the dollar and stock indexes climbed on Tuesday, recovering further after a large-scale sell-off in January caused by increased tensions between Moscow and the West.

By 0947 GMT, the rouble had firmed 0.4% to 77.02 per dollar after hitting 76.8250, its strongest since Jan. 21. Against the euro, the rouble gained 0.3% to 86.70.

The currency is moving away from a near 15-month low of 80.4125 versus the greenback hit last week, battered by tensions with Western powers threatening to impose new sanctions on Russia if it takes aggressive steps towards Ukraine.

On Tuesday, the market will be watching for developments from phone conversations between Foreign Minister Sergei Lavrov and U.S. Secretary of State Antony Blinken.

Russian President Vladimir Putin and UK Prime Minister Boris Johnson had also been expected to talk by phone but the Kremlin said this won't happen on Tuesday, although another date for the call could be agreed.

"The sanctions rhetoric continues and recent market gains are fragile, ready to break at a headline's notice," BCS Global Markets said in a note.

"If the geopolitical tensions do not escalate, we expect the rouble may be able to gain a foothold around 77," Sberbank CIB said in a note.

The Russian market is in the middle of a storm, which could provide the rouble and stocks with substantial room for upside moves when it is over, said Sofia Donets, chief economist at Renaissance Capital.

The rouble is expected to average 75 versus the dollar in February, according to VTB Capital's revised model, which assumes a stable foreigners' share in Russian government bonds, oil prices at $90 per barrel and no increase in emerging markets' risk premium.

Brent crude oil , a global benchmark for Russia's main export, was down 1% at $88.33 a barrel, but still hovering near levels last seen in October, 2014 and supporting Russian stock indexes.

The dollar-denominated RTS index rose 1.5% to 1,456.4 points. The rouble-based MOEX Russian index was 0.8% higher at 3,558.2 points, moving away from its lowest level since August 2020 of 3,158.46 it touched during the sell-off last month.

Reporting by Andrey Ostroukh; Editing by Andrew Heavens, Ed Osmond and Kim Coghill

Source: Reuters

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