(Reuters) – Russian stock indexes fell on Wednesday, hit by a new set of Western sanctions over Moscow’s actions in Ukraine, while the rouble rallied in thin trade to a six-week high.

Equities largely lost ground after the United States announced a new round of sanctions targeting Russian financial institutions, as well as Kremlin officials and their family members. Russia calls its actions in Ukraine a “special military operation” and denies targeting civilians.

The new sanctions hit Russia’s Sberbank, which holds one-third of Russia’s total banking assets, and Alfa Bank, the country’s fourth-largest financial institution, U.S. officials said. But energy transactions were exempted from the latest measures, the officials said.

The rouble-based MOEX Russian index ended the day 1.9% lower at 2,611.4, heading further away from an all-time high of 4,292.68 reached in October.

Shares in Sberbank underperformed the market after the new sanctions, falling 8.1% to 141.60 roubles ($1.78) per piece.

Its rival, the second-largest lender VTB, shed 4.9% on the day.

Sberbank and Russia’s largest private lender Alfa Bank have both said new U.S. sanctions would not have a significant impact on the banks’ operations.

Downside pressure on shares emanating from negative sentiment around news on Western sanctions could be limited as the government has promised to support Russian companies by buying their stocks with money channelled from the rainy-day National Wealth Fund.

The Russian stock market is showing “miraculous resilience” to sanctions and a rapid drop in activity in the domestic manufacturing and services sectors in the absence of foreign investors that are still barred from taking part in trading in Russia, Finam brokerage said in a note.

The dollar-denominated RTS index received support from the weaker dollar and rose 3% to 1034.79.

ROUBLE RALLY

The Russian rouble extended recovery gains on Wednesday, returning to levels seen before Russia sent tens of thousands of troops to Ukraine on Feb. 24 as it headed further away from an all-time low of nearly 121.53 to the dollar and 132.41 to the euro it hit in Moscow trade in March.

The Russian currency also shrugged fears that Russia edged closer to a potential default on its international debt as it paid dollar bondholders in roubles and said it would continue to do so as long as its foreign exchange reserves are blocked by sanctions.

The rouble added more than 4% on the day to 79.70 to the dollar, having earlier hit 79.01, a level last seen on Feb. 23. The market turnover in the main session reached $706 million, far below an average of $4 billion to $6 billion seen before Feb. 24.

Against the euro, the rouble gained 5% to 87 after hitting 85.5975, its strongest since Feb. 17, supported artificially by capital control measures and a ban on buying cash forex.

The rouble is driven by export-focused companies selling foreign currency and a low activity of importers, Promsvyazbank said, adding that it cannot be ruled out that the Russian currency firms to 74-76 to the greenback in coming days.

The rouble is also likely to retain support from the central bank’s monetary policy as inflation accelerated to a seven-year high of 16.7%.

The central bank, which raised its key rate to 20% in an emergency move in late February, will next meet on rates on April 29.

($1 = 79.7500 roubles)

(Reporting by Reuters; editing by Kirsten Donovan and Lisa Shumaker)

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