Russian rouble recovers past 76/dollar; geopolitical risks weigh

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MOSCOW, Jan 17 (Reuters) - The rouble firmed on Monday, recovering some ground after a sell-off late last week sparked by fears of an escalation in tensions between Moscow and the West, with geopolitical risks continuing to hold sway over Russian assets.

The United States said it feared Russia was preparing a pretext to invade Ukraine if diplomacy fails to meet its objectives, after a massive cyberattack splashed Ukrainian government websites with a warning to "be afraid and expect the worst". read more

At 0740 GMT, the rouble was 0.6% stronger against the dollar at 75.77 and had gained 0.4% to trade at 86.57 versus the euro .

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The unit suffered its biggest drop in 15 months on Thursday, after Russia said Washington's rejection of Moscow's key security demands was leading talks into a dead end.

Yields on Russia's 10-year benchmark OFZ government bonds, which move inversely to their price, opened at 9.28% , below Friday's high of 9.46%, but prices were still at a more than three-year low. Bond prices hit their lowest since early 2016 on Friday.

"Russia's geopolitical risk is at a local high after the failure of last week's talks and the bombastic comments that followed – the course of future events is hard to predict, but international investors will likely be hesitant for now," BCS Global Markets said in a note.

Brent crude oil , a global benchmark for Russia's main export, was up 0.6% at $86.55 a barrel, helping Russian stock indexes recover from months-long lows after being routed on Friday. read more

The dollar-denominated RTS index (.IRTS) was up 2% to 1,516.1. The rouble-based MOEX Russian index (.IMOEX) was 1.4% higher at 3,647.7.

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Reporting by Alexander Marrow; Editing by Rashmi Aich

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