Russian rouble recovers past 74 vs weaker dollar

MOSCOW, July 26 (Reuters) - The Russian rouble pared losses to strengthen against a weakening dollar on Monday as oil prices stabilised near $74 a barrel amid global risk aversion, with COVID-19 cases rising worldwide.

By 1528 GMT, the rouble was 0.1% stronger against the dollar at 73.71 RUBUTSTN=MCX , recovering from 74.28, its weakest level since July 21 hit earlier on Monday. The rouble lost 0.3% to trade at 87.06 to the euro EURRUBTN=MCX .

The rouble is expected to remain closer to the lower end of the 73.5-75.5 range against the dollar on Monday and its weakening is likely to be limited by still high oil prices and last week's central bank rate hike, Promsvyazbank said in a note.

Brent crude oil LCOc1 , a global benchmark for Russia's main export, was down 0.1% at $74.07 a barrel, but not far from the 2021 high of around $77.84 hit earlier this month.

The central bank raised its key rate by 100 basis points to 6.5% on Friday, its sharpest hike since 2014, and indicated that further increases were possible.

Russia needs higher rates to tame consumer inflation with more expensive lending and increased incentive for bank deposits. However, more expensive lending will also hamper economic recovery.

Investors also have one eye on a U.S. Federal Reserve meeting this week, looking for clues as to when the Fed may begin to tighten, BCS Global Markets said in a note.

Sberbank CIB analysts said the winding down of a month-end tax period, which usually sees export-focused companies convert foreign currency into roubles, and investor caution ahead of the U.S. Fed meeting would likely make any strengthening of Russia's currency temporary.

Russian stock indexes were also paring losses to edge higher.

The dollar-denominated RTS index .IRTS was up 0.5% to 1,588.5 points. The rouble-based MOEX Russian index .IMOEX was 0.5% higher at 3,735.1 points.

For Russian equities guide see RU/EQUITY

For Russian treasury bonds see 0#RUTSY=MM
Reporting by Alexander Marrow; Editing by Steve Orlofsky

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