MOSCOW, Nov 28 (Reuters) - The Russian rouble rebounded

on Thursday from a more than 7% slide against the U.S. dollar in

the previous session after the central bank said it would stop

buying foreign currency to stabilise financial markets.

By 0845 GMT the rouble was up 2.60% at 110.20 to the dollar,

although that was still its weakest level since March 2022, the

first month of the Ukraine war, according to over-the-counter

data from banks.

Russia's central bank said on Wednesday it had decided not

to buy foreign currency on the domestic market from Nov. 28

until the end of the year, but to defer these purchases until

2025.

The rouble also extended gains against China's yuan to 14.60

on Thursday, according to Moscow Stock Exchange (MOEX) data.

"The reason for the turnaround is the central bank's

decision to stop purchasing foreign currency as part of the

budget rule," analysts at the BCS brokerage said, stressing that

market volatility will remain high.

Trade in dollars and euros moved to the over-the-counter

market after the West imposed sanctions on MOEX in June. Banks

trading these currencies report quotes to the central bank,

which uses them to set the official exchange rate, at 108.01 to

the dollar for Thursday.

One-day rouble-dollar futures on MOEX, the only publicly

available trading quote for the dollar rate, were up 1% at

108.32.

Western currency trading has been dominated by a few Russian

banks not under sanctions, including Gazprombank, which handles

Russia's remaining natural gas trade with the West, and Western

banks still operating in Russia.

However, new U.S. sanctions on Gazprombank triggered panic

buying in the currency market and were behind the rouble's

slide, according to Dmitry Pyanov, a top executive from VTB,

another large Russian bank under sanctions.

There is a wind-down period for transactions involving

Gazprombank until Dec. 20, by which date Russia's remaining

energy clients in the West will need to find another payment

solution.

Russian banks which have been targeted by sanctions, also

including Sberbank, cannot trade dollars and euros since

corresponding accounts at Western banks are required. China's

yuan is now the most traded foreign currency in Russia.

Banks operating under sanctions are buying dollars and euros

overseas and importing the cash by plane from countries which

have not imposed restrictions on trade with Russia.