"Yeltsin's sacking of his prime minister is marginally negative for the euro," said Paul Lambert, senior currency strategist at Citibank. "But the impact of this event should not be overemphasized as the political situation there has been problematic for some time."
At the same time Russian markets recovered some poise on Tuesday after being rocked by President Boris Yeltsin's sacking of Prime Minister Sergei Stepashin, but they remain vulnerable to fresh political jolts and unrest in the Caucasus.
Analysts said the ruble and stock market stabilized after being near collapse on Monday amid expectations of continuity in economic policies if acting Prime Minister Vladimir Putin is confirmed in his post next Monday by the State Duma, the lower house of parliament.
However, dealers attributed the ruble's stability in part to the central bank's intervention to support the currency for the second day running, while shares slipped from their highs because the morning rise had been "too far, too fast," said one trader.
Martin Diggle, a director at Brunswick Warburg, said most of the original shock of Ste-pashin's sacking had subsided.
"People seem increasingly comfortable with the idea of Putin but uncomfortable with the ease with which Yeltsin can chop and change his prime ministers," he said.
The main RTS1-Interfax stock market index was at 102 points Tuesday evening, up from as low as 90 points on Monday morning - immediately after the government's dismissal.
Caren Gaboutchian, eco-nomist at ING Barings, said political volatility mostly affected the foreign exchange market, although the central bank had established a degree of predictability.
"However, if this political instability persists, I don't think the central bank has much room to maneuver," he said, adding that the International Monetary Fund would scrutinize the implementation of the policies agreed with Ste-pashin's government.
Oleg Martynenko, head of domestic equities and fixed income at Alfa Bank, predicts little foreign investment in Russia until after the presidential elections.
"What Yeltsin did to Stepa-shin is another confirmation for the West that they have to wait for the new presidential elections before deciding whether or not to invest in Russia," he said.
Another potential worry is the unrest in Dagestan, although it has had little impact so far.
"Obviously it is not good news for the markets, because Russia would have to spend more in trying to tackle the situation politically, and if that is not possible, then militarily," one analyst said.
"Putin was very optimistic, saying he thinks he would sort out the Dagestani situation in a couple of weeks."