* Rouble ends week down 1.5 pct vs basket
* Dealers say c.bank may step in if rouble slump continues
* RTS, MICEX indexes hit lowest in 1-1/2 months
* Move sparked buy Dubai news, oil price; may not last
(Adds closing prices, quotes, Putin)
By Toni Vorobyova and Yelena Fabrichnaya
MOSCOW, Nov 27 (Reuters) - The Russian rouble notched up its worst weekly showing in four months due to investor risk aversion on Dubai debt woes, with dealers' expectations rising that the central bank will intervene to slow the fall.
Investor sentiment on emerging markets has been soured by a move by Dubai to restructure some debts of its biggest companies [EMRG/FRX]. A retreat in the oil price also weighed. [O/R]
The rouble's fall comes after a nearly three-month long oil-fuelled rally and brings some relief to authorities worried that the currency's strength, also caused by hot money inflows, could derail the export-oriented economy's fragile recovery.
However, the sharpness of the latest moves increases the chances the central bank could start foreign currency sales as part of its policy to smooth out excessive volatility in either direction and prevent a very sharp reverse in capital flows.
"If the problems with debt of Dubai investment company continue to escalate and evolve into an effective default, we could see a dramatic spike in the global investor risk aversion," said Vladimir Osakovsky, analyst at UniCredit.
"One of the most likely implications of such for Russia could be the escalation of the capital flight."
"This could endanger gains on the local equity market we saw during 2009...(and) endanger the prospects of economic recovery in 2010, as it could undermine the tentative stabilisation of the local banking system and investment demand."
The Russian stocks index RTS <.IRTS> opened 5 percent down, hitting a 1-1/2 month low. The rouble weakened as far as 36.57 versus a euro-dollar basket, its weakest since late September.
Markets also turned more bearish on the future prospects for
the rouble. Non-deliverable forwards (NDFs), a barometer of
market sentiment, showed the rouble at 31.70 per dollar in 12
months' time
"PRICE OF FEAR"
The rouble later erased some of the losses, with dealers saying the original move had been too far, too fast.
"I don't see how you can retrace two months' in a day just because Dubai is struggling a bit. It's the price of fear," a dealer at a foreign bank in Moscow said.
It closed at 36.87 to the basket, still down 1.5 percent for
the week
Russian Prime Minister Vladimir Putin, on a visit to Paris, said Dubai's woes confirmed that the world's exit from the crisis will not be easy, but added that the latest rouble retreat will come as a boon to some Russian exporters.
Market participants and experts stopped short of predicting a long-running rout in the rouble.
"Dubai is a long way away, after all ... There is no point in collapsing the rouble. And if it falls any further, people may start buying," said Anton Vorovatov, dealer at Nomos Bank.
Konstantin Korishchenko, head of the MICEX and a former central banker, said: "Time will show whether this is a start of more long-term trend, but my feeling is that it is not."
Any foreign currency sales from the central bank will mark a shift in policy after weeks of regular dollar purchases to slow down the rouble rally.
The central bank said it was increasing interventions within the rouble's floating corridor, rather than just on its boundaries which are currently set at 35-38 to the basket. Such interventions are harder to spot and predict, increasing the risk of rouble bets for would-be speculators.
At the same time, Russian authorities are looking at various measures to discourage the massive inflow of speculative capital seen in recent weeks. [ID:nGEE5AP05M] (Additional reporting by Olga Borodina; editing by Chris Pizzey and Andy Bruce) ((antonina.vorobyova@reuters.com; Tel: +7495 7751242, Reuters Messaging: antonina.vorobyova.reuters.com@reuters.net))