Updates with rouble recovery
MOSCOW, July 20 (Reuters) - The Russian rouble recovered from its weakest against the euro since early May and moved away from a two-week low versus the U.S. dollar on Monday, with gains being capped by global risk aversion and falling oil prices.
At 1335 GMT, the rouble gained 0.8% to 81.56 versus the euro EURRUBTN=MCX after briefly weakening to 82.60, a level last seen on May 4.
The rouble gained 0.7% to 71.42 against the dollar RUBUTSTN=MCX after hitting 72.15, its weakest level since July 7.
The threat of sanctions against Russia resurfaced and put pressure on Russian assets after the United States last week imposed sanctions on individuals and entities it said enabled a blacklisted ally of Russian President Vladimir Putin to evade earlier penalties.
"For Russia, sanctions rhetoric may put a dampener on local trade and investors may prefer to take a 'wait and see' approach," BCS brokerage said, predicting low trading volumes this week.
The Russian central bank's rate-setting meeting scheduled for Friday is in focus. A Reuters poll predicted the bank will cut the key rate by at least 25 basis points from an already record low of 4.5% amid an economic crisis sparked by the new coronavirus outbreak.
In the second quarter, the economy shrank by 9.6% compared with a year ago and Russians' real disposable income plunged the most in 20 years, highlighting one of the most socially sensitive issues.
"The rouble may remain volatile near levels it reached until the central bank's decision," said Dmitry Polevoy, chief economist at the Russian Direct Investment Fund.
Brent crude oil LCOc1, a global benchmark for Russia's main export, was down 0.6% at $42.87 a barrel.
Russian stock indexes pared earlier losses along with the rouble. The dollar-denominated RTS index .IRTSrose 1.3% to 1,231.6 points. The rouble-based MOEX Russian index .IMOEX was 0.7% higher at 2,793.0 points.
For Russian equities guide see RU/EQUITY
For Russian treasury bonds see 0#RUTSY=MM
(Reporting by Andrey Ostroukh; editing by Emelia Sithole-Matarise, Larry King)
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