MOSCOW: The Russian rouble tumbled on Thursday, at one point losing 2% to the dollar in volatile trade and hitting a more than five-month low versus the euro as the White House announced new sanctions targeting Russia's sovereign debt.

US President Joe Biden issued an executive order prohibiting US financial institutions from participating in the primary market of Russia's government debt from June 14, with the order allowing for those actions to be expanded in future.

The measures also included the expulsion of 10 personnel from Russia's diplomatic mission in Washington, including intelligence officials, with sanctions seeking to punish Moscow for interfering in the 2020 US election, allegations Russia denies.

The Kremlin said on Thursday it would respond in kind to any new "illegal" US sanctions on Russia.

By 1250 GMT, the rouble was 0.6% weaker against the dollar at 76.31, falling well away from the two-week high hit in the previous session and earlier losing more than 2% to 77.55.

It had lost 0.5% to trade at 91.35 versus the euro , earlier clipping a more than five-month low of 92.85.

After losing so much ground in early trade, the rouble slipped on the official announcement before paring some losses.

"This is a moderately tough scenario for which the market has been preparing," said Dmitry Dolgin, chief economist for Russia and CIS at ING.

The sanctions are long-awaited and priced in by the market, Sergei Romanchuk, head of foreign exchange and money markets at Metallinvestbank said, adding that news on sanctions increased the likelihood of the central bank hiking its key rate by 50 basis points to 5% next week.

The restrictions on sovereign debt are similar to an earlier ban on US banks participating in the primary market for non-rouble denominated bonds issued by the Russian sovereign. Those sanctions do not restrict the buying of Russian Eurobonds on the secondary market.

Russia sovereign dollar bonds, OFZ rouble bonds and Russia 5-year credit default swaps - the cost of insuring exposure to sovereign debt - all took a hit earlier on Thursday before trying to regain ground.

Russia's 10-year benchmark OFZ yields - a proxy for borrowing costs - jumped 25 basis points at one point on the day before settling at 7.22% in the secondary market, hovering around levels last seen a year ago and also reached in late-March on geopolitical risks.

The proposed format of restrictions should not fundamentally affect the Russian market and the increase in OFZ yields can be levelled out quite quickly, said Promsvyazbank in a note.

A phone call between US President Joe Biden and his Russian counterpart Vladimir Putin on Tuesday had eased fears of imminent sanctions and the rouble was boosted by Biden's proposal for the two leaders to hold a summit to tackle a raft of disputes.

Lower oil prices on Thursday also added to the pressure on Russian stock indexes.