(Adds protests, quotes, details)
By Toni Vorobyova
MOSCOW, Feb 2 (Reuters) - The Russian rouble hit fresh lows versus a euro-dollar basket on Monday, coming within half a percent of the trading boundary where a showdown is expected between speculators and the central bank.
Russia has spent some $200 billion, or a third of its reserves, keeping currency depreciation gradual in the face of low oil prices and the worst economic outlook in a decade.
The weakening currency and economic slowdown, which has seen hundreds of thousands lose jobs or face salary cuts, galvanised thousands of Russian opposition supporters to march through key cities on Saturday [ID:nLV284002].
The central bank sought to set a floor under the rouble, from Jan. 24 setting its trading boundaries at 26 to 41 versus a euro-dollar basket, and vowing to defend them with market interventions and interest rates.
Last week it started to reduce the amount of funds on offer at its liquidity injections, and from Monday raised rates on a number of Lombard and repo operations by 100 basis points.
But pressure on the rouble remained. On Monday it weakened
by nearly 50 kopecks to a fresh trough of 40.80 to the basket
"We are going to test the 41 level. It is completely natural to see how much the central bank is ready to spend (on defending that level), said Natalya Orlova, chief economist at Alfa Bank.
The rouble also hit fresh historic lows of 46.23 versus the
euro
Dealers said there were no signs of central bank intervention in early trade on Monday, after the regulator sold an estimated $4 billion to smooth out the rouble path last week.
POPULAR UNREST TO RISE?
One key argument for keeping depreciation gradual is to avoid panic in a country where the general public clearly remembers the last financial crisis in 1998, when the rouble lost over two-thirds of its value in a year.
Although Saturday's protests drew relatively few protesters for a country of around 140 million, the action was of unusual scale for a country where political leadership has enjoyed widespread support in recent years.
"We expect popular unrest to become an increasingly important problem for authorities in Russia, as the general population is yet to realize full effects of economic crisis, falling wages and rising unemployment," Vladimir Osakovsky, analyst at UniCredit said in a research note.
That "might test true political support to the ruling elite, and challenge political stability as one of the key pillars of Russian investment climate over the past several years."
Political analysts say the handling of the crisis is key for Prime Minister Vladimir Putin if he wants to return to the Kremlin at the next presidential elections.
Analysts said the central bank had effectively staked its reputation on its ability to hold the 41 roubles/basket level.
"The central bank has to defend that level. Otherwise, it would lose all remaining credibility in the market, as everybody in the world could clearly see that the central bank were unable to stop rouble depreciation," Commerzbank said in a client note.
A Reuters poll last week showed the rouble ending the year at 41.45 to the basket, just slightly beyond the central bank's trading boundary [ID:nRUPOLL].
But politicians need to draw a fine line between supporting the currency and preserving some reserves to support the economy, plug an expected budget deficit and protect Russia's credit ratings. (Additional reporting by Yelena Fabrichnaya)