Rouble tumbles after Russia-backed rebels in eastern Ukraine announce evacuations

By Alexander Marrow and Andrey Ostroukh

MOSCOW (Reuters) -The rouble weakened on Friday, tumbling past 77 to the dollar after Russian-backed separatists announced the sudden surprise evacuation of their breakaway regions in eastern Ukraine, spooking already jittery markets.

Russia has repeatedly rejected Western assertions that it may be planning to invade neighbouring Ukraine, but its assets have been hammered by fears of a military conflict that would almost certainly trigger sweeping new Western sanctions against Moscow.

By 1651 GMT, the rouble was 1.3% weaker against the dollar at 77.29, slipping sharply from a session-high of 75.63 after the self-proclaimed regions of Donetsk and Luhansk announced evacuation plans. The rouble extended losses on reports of a car being blown up in Donetsk.

President Vladimir Putin ordered the emergencies minister to travel to southeast Russia to organise accommodation for residents leaving.

Against the euro, the rouble slipped 1.1% to 87.54.

The Russian currency had traded at 74.26 against the greenback before the latest sell-off started a week ago.

"The week ends as it began, awash in uncertainty on the geopolitical and economic fronts, suggesting caution and some bargain-hunting will be at play," BCS Global markets said.

TENSIONS ON THE BORDER

Russian markets have been buffeted by tensions over Ukraine, improving on reports of Russian troop withdrawals from near the border, but slumping as Western powers warn of imminent invasion.

U.S. President Joe Biden on Thursday said Russia was preparing a pretext to justify an incursion, but high-level Moscow-Washington talks earmarked for late next week are holding open hopes of a diplomatic solution.

Joint military drills between Russia and Belarus, which both share borders with Ukraine, have put the West on edge.

Meeting his Belarusian counterpart Alexander Lukashenko in Moscow on Friday, President Vladimir Putin said Russia must enhance its economic sovereignty to counter the threat of sanctions.

Fitch Ratings said there had been a marked increase in the risk of severe sanctions that could pressure Russia's sovereign and bank ratings.

U.S. sanctions cutting off Russian state banks from the dollar are the most powerful measure for NATO members, according to Russian executives, bankers, and former senior U.S. sanctions officials.

Russian stocks pared gains to slide. The dollar-denominated RTS index fell 4.1% to 1,391.3 points. The rouble-based MOEX Russian index was 3.4% lower at 3,393.3 points, its lowest point since Jan. 27.

(Reporting by Andrey Ostroukh and Alexander Marrow; Editing by Christina Fincher and Raissa Kasolowsky)

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