(Updates to reflect slight rouble recovery)

By Alexander Winning and Vladimir Abramov

MOSCOW, Oct 15 (Reuters) - Russia's rouble bounced off an all-time low against the dollar on Wednesday after again breaching the limits of its trading band, but traders said there would be no let-up for the currency.

The rouble has been hammered for months as investors shun Russian assets due to the Ukraine crisis and Western sanctions which have starved local firms of foreign currency.

That pressure has grown this month as oil prices have been routed, with Brent crude futures slipping more than 10 percent in two weeks to multi-year lows.

The rouble loosened to more than 41 to the dollar for the first time on Wednesday morning. By 1240 GMT it had recovered to trade 0.4 percent stronger than Tuesday's close at 40.76 . Against the euro it was flat at 51.83 .

"Non-residents from London are selling foreign currency. It seems like they are looking for a way into the rouble. They could have found it around the level of 41 per dollar," said a trader at a large Western bank.

"At the same time there aren't major purchases of foreign currency compared with the morning madness. However, further ahead it's probable there will be buying of foreign currency on dips and a renewed weakening of the rouble," the trader said.

Market participants said profit-taking on long positions in foreign currency and talk of new instruments to address a shortfall in dollar liquidity were also helping the rouble.

Traders said the bill for the central bank's defence of the currency this month has exceeded $10 billion.

"The recent rouble weakening has been a re-adjustment to weaker fundamentals - lower oil prices - so the rouble outlook now fully depends on the scale of extra oil decline, if it continues," Dmitry Polevoy, chief economist for Russia and CIS at ING Bank in Moscow, said in a note.

Russia receives up to half of its federal budget revenues from sales of oil and gas, and a $1 fall in the price of oil effectively costs the federal government around $1.7 billion.

As of 1240 GMT, the rouble was up 0.2 percent at 45.75 against the dollar-euro basket the central bank uses to gauge the nominal exchange rate. But it spent much of the session well beyond the upper limits of the new trading band the central bank had set on Tuesday, implying further interventions to support the currency.

The bank automatically intervenes once the rouble breaches its trading band. It also shifts the band by 5 kopecks after spending $350 million in any round of intervention.

The bank says it spent close to $7 billion in interventions from Oct 2 to 13 but it releases this data with a lag of two days. Traders say the most recent shifts in the trading band have pushed the intervention bill above $10 billion.

NEW INSTRUMENTS

Russia's finance minister said on Wednesday his ministry planned to start foreign exchange deposit auctions within a month to smooth rouble volatility.

"Given the scale of the market stress, the MinFin deposits alone won't be able to cure the FX market, especially if the rouble continues falling further and stimulating rising demand from households," said Polevoy at ING Bank, who estimated the size of the deposits at around $5.7 billion.

In another move to help Russian firms shut out of international capital markets, the central bank plans to launch 7- and 28-day foreign currency repos by the end of the month.

"These measures could be decisive but everything depends on what conditions are attached to them," said Yury Tulinov, head of research for capital markets and investment banking at Rosbank in Moscow.

"If the central bank introduces repos but the rates on them are prohibitively high and the instrument is little used, then it's clear this won't bring any calm to the market. Quite the opposite, it could further destabilise the situation."

Russian shares also turned lower on Wednesday, wiping out strong gains in the previous session on hopes for some respite in tensions over Ukraine after President Vladimir Putin ordered some troops to withdraw from near the Ukraine border.

The dollar-denominated RTS index was down 0.5 percent to 1,070 points, while its rouble-based peer MICEX traded 0.5 percent lower at 1,386 points.

Among Russia's blue chips, top bank Sberbank was down 1.5 percent and oil producer Rosneft fell 0.9 percent.

For rouble poll data see

For Russian equities guide see

For Russian treasury bonds see

Russia in graphics: http://link.reuters.com/dun63s (Editing by Jason Bush and Hugh Lawson)