Russian rouble strengthens slightly vs US dollar after Ukraine talks in Istanbul

MOSCOW, June 3 (Reuters) - The Russian rouble strengthened slightly against the U.S. dollar on Tuesday, regaining some ground after a fall in the previous session caused by Ukraine's attack on Russian air bases and uncertainty over the outcome of talks in Istanbul.

By 0815 GMT, the rouble RUB= was up 0.5% at 78.80 per U.S. dollar, LSEG data based on over-the-counter quotes showed. The rouble hit 76.90 to the dollar, its strongest since May 2023, on May 29.

"The Istanbul negotiations were neutral, which led to the recovery of the rouble's exchange rate," BCS brokerage analysts said in a research note.

The Russian and Ukrainian delegations met for barely an hour in Istanbul on Monday and agreed to exchange more prisoners of war and return the bodies of dead soldiers, but there was no breakthrough on a proposed ceasefire.

Markets will be watching the central bank's board meeting on June 6 and many economists are expecting the regulator to keep its key interest rate on hold at 21% but soften its rhetoric and signal rate cuts later in the year.

Such a signal may reverse the rouble's rally, with the Russian currency having gained 42% against the dollar since the start of the year. Most analysts agree that the rouble is overvalued and is likely to weaken in the coming months.

"In the medium term, foreign currency exchange rates are expected to be significantly higher than current levels, and right now a base for a reversal is simply being formed," BCS analysts said.

Against the Chinese yuan, the rouble was flat at 10.89 on the Moscow Stock Exchange. Russia's central bank uses yuan for foreign exchange interventions, and it is the most traded foreign currency in Russia.