* Rouble stable after blasts in Moscow metro
* Recovers from earlier fall
* New gains possible due to strong oil
* Russian stock markets record gains
(Adds comments, details, updates prices)
By Andrey Ostroukh
MOSCOW, March 29 (Reuters) - The Russian rouble recovered from a sell-off sparked by two deadly bombs on the Moscow metro system on Monday as traders said the blasts were not unprecedented and the market remained driven by strong oil.
The Russian forex market was initially rocked by reports that the blasts on two packed Moscow metro trains during the morning rush hour killed at least 38 people and wounded 64. [ID:nLDE62S04J]
In the first minutes of trade on the MICEX exchange the
rouble fell to its lowest level since March 10 at 34.43 versus
the euro-dollar basket
But the negative reaction was short-lived and the rouble managed to bounce back, ending the day at 34.14 against the basket, almost unchanged from the previous close and around 20 kopecks away from the 14-month high hit last week.
"The initial response (on blasts) was negative but it faded quickly enough," said Mikhail Spolokhov, dealer at MDM bank.. Fundamentally, there are no reasons for the rouble's weakening. The rouble will depend much on economic news."
Russian stock markets showed steady growth, edging up after minor dips in the first few minutes of trading.
The rouble-dominated MICEX exchange <.MCX> was up 1.6 percent by 1405 GMT, while the dollar equivalent RTS <.IRTS> climbed almost 2.0 percent.
"The Russian stock market is more than stable, the rouble is stable... it's not the first blast in Moscow, people will be eager to know the details (of the explosion), but the first reaction on the blasts is no reaction, even after the London market was opened," said Anatoly Darakov, a trader at Citi.
PSYCHOLOGICAL
However, some market watchers reckon the incident could have a more profound impact on the rouble in the longer term.
Dealers said the dollar and the euro had been broadly oversold against the rouble, which has been rallying for weeks, and market players are watching closely for any developments on the explosion in Moscow's underground.
"It is a psychological moment. The sentiment is very bad, a lot of uncertainty. The market was overshort (in foreign currencies) so the (early) reaction is explainable," said a dealer at a major Russian bank in Moscow.
Non-residents may also start to withdraw funds from the
rouble later in the week, dealers said, but fundamentals remain
supportive for the Russian currency with oil prices around $80
"Probably, there will be a delayed reaction on the blasts depending on how the situation develops," said Spolokhov at MDM bank, adding that the oil prices will remain the main guidance fot the currency.
Oil futures have been trading sideways at relatively high levels for the last three weeks but, according to technical analysis, they may break out the corridor already this week. [ID:nLDE62S13Q]
The rouble retains its appeal as a high yielding currency to be used in carry trade operations even after the central bank cut rates to record lows last Friday, bringing the benchmark refi rate to 8.25 percent -- still higher than in other G8 economies. [ID:nLDE62P0Q9]
Against the dollar, the rouble gained 8 kopecks to 29.56,
having fallen to as low as 29.8
(Additional reporting by Zlata Garasyuta and Olga Borodina; Writing by John Bowker; Editing by Ruth Pitchford and Toby Chopra)