UPDATE 1-Rouble hits over 2-week high as rising oil prices outweigh sanction risks

(Updates prices, adds Morgan Stanley note)

MOSCOW, Feb 8 (Reuters) – The Russian rouble firmed to a more than two-week high against the dollar on Monday, helped by rising oil prices and generally more positive sentiment that outweighed concerns about possible new sanctions over jailed Kremlin critic Alexei Navalny.

The rouble spearheaded an emerging market rally, with stocks trading near record highs on optimism over a global economic recovery thanks to steady vaccine rollouts.

By 1131 GMT, the rouble was 0.3% stronger against the dollar at 74.42, its highest since Jan. 22.

Against the euro, it strengthened 0.4% to 89.55, earlier hitting its strongest since Jan. 21 of 89.2500.

Brent crude oil, a global benchmark for Russia’s main export, was up 1.4% at $60.15 a barrel, reaching a more than one-year high.

Current conditions should allow the rouble to strengthen to 74 versus the dollar and possibly beyond that, said Dmitry Polevoy, head of investment at Locko-Invest.

Nationwide protests over Navalny, who was jailed last week for almost three years for parole violations he calls trumped up, have pressured the rouble in recent weeks.

However, the threat of imminent sanctions against Russia eased after the EU’s foreign policy chief said no formal proposal had yet been tabled, during a rare visit to Moscow last week.

Morgan Stanley on Monday initiated a long Russian rouble position against a 50-50 basket of the dollar and the euro, saying new U.S. sanctions being proposed related to the Navalny case would not pose a material risk to Russia’s macroeconomic outlook.

“We think it’s time to get back into Russian assets,” the U.S. investment bank’s analysts said in a note titled: “Enough Waiting, Time To Buy”.

In Russian stock markets, the dollar-denominated RTS index gained 1.5% to 1,453.6. The rouble-based MOEX Russian index was 1.2% higher at 3,434.4. Both the indexes rose to their highest since Jan. 21.

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