* Rouble recovers vs dollar, euro
* Sees support from strong demand for government bonds
* Risks of fresh sanctions remain in focus (Updates with OFZ bond auctions)
MOSCOW, Sept 9 (Reuters) - The Russian rouble gained around 1% on Wednesday as strong demand for government bonds helped it recover from recent lows hit over concerns about the possibility of more Western sanctions against Moscow.
Being one of the worst-performing currencies against the dollar this year, the rouble took a hit from geopolitical risks related to turmoil in neighbouring Belarus and the suspected poisoning of Kremlin critic Alexei Navalny.
But investors in Russian government bonds, known as OFZs, did not shun away from the papers on Wednesday.
The finance ministry sold 159 billion roubles ($2.10 billion) worth of OFZ bonds, enjoying demand of nearly 309 billion roubles. Such auctions are usually seen as a gauge of a broader demand for Russian risks and assets.
Non-residents and Russian private banks were among buyers of OFZs this time, unlike last week when state-run banks bought the main bulk of papers, said Evgeny Suvorov, author of market-focused MMI channel in Telegram messenger, citing traders’ data.
The finance ministry does not disclose who buys OFZs at its weekly auctions but non-residents’ share in these rouble-denominated bonds shrank to 28.5% as of late August from 29.8% as of Aug. 1.
The rouble gained 1% to 75.52 against the dollar, as of 1404 GMT, heading away from Tuesday’s 76.5950, its weakest level since April 22.
Versus the euro, the rouble gained 0.6% to 89.28 but was still near its weakest level since early 2016 of 90.26 that it touched on Tuesday.
The Kremlin on Wednesday played down concerns about the weak rouble, saying the Russian currency “almost always rolled back” to previous levels in previous periods of high volatility.
Oil prices helped the rouble by reversing some losses although a rebound in COVID-19 cases in some countries still undermined hopes for a steady recovery in global demand.
The rouble may stay in the range of 75-80 against the dollar in coming weeks if Brent crude futures do not recover above $40 per barrel, Promsvyazbank said.
Brent crude oil, a global benchmark for Russia’s main export, was marginally up at $40.07 a barrel by 1339 GMT.
Russian stock indexes were mixed. The dollar-denominated RTS index was up 0.9% at 1,200.4 points. The rouble-based MOEX Russian index was 0.3% lower at 2,879.2 points.
For Russian equities guide see
For Russian treasury bonds see ($1 = 75.5545 roubles) (Reporting by Andrey Ostroukh Editing by Raissa Kasolowsky and Ramakrishnan M.)
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