The Russian central bank said on Monday it was suspending purchases of foreign currency after the stock market and ruble tumbled over fears Russia may attack Ukraine.

Stocks plunged sharply following two weeks of steady decline, with the dollar- denominated RTS index down nine percent.

The Russian currency fell to its lowest point in more than a year against the dollar at 79 rubles.

The Russian central bank said it was halting purchases of hard currency in an effort to reduce volatility on financial markets.

"This decision was taken in order to increase the predictability of the actions of the monetary authorities and reduce the volatility of financial markets," the Bank of Russia said.

The bank did not give a timeframe, adding it had enough instruments at its disposal to guard against risks to the financial stability.

"Markets are waking up to increased geopolitical and sanctions risks around Russia," Timothy Ash, a senior emerging markets strategist at London-based Bluebay Asset Management, said in a note to clients.

The ruble has hit its lowest point in more than a year as tensions with the West soar The ruble has hit its lowest point in more than a year as tensions with the West soar Photo: AFP / Anatolii STEPANOV

In consultation with the US and other allies, the EU is pushing to put together a package of sanctions against Moscow that it hopes will help deter Russia from any military action.

"We expect Russian equities to extend losses today due to an escalation in geopolitical tensions over the weekend," analysts at Alfa Bank said earlier in the day.

Renaissance Capital said that the ruble could fall by as much as 20 percent against the dollar in the event of a military escalation.

Tensions are rising over Russia's deployment of some 100,000 troops at Ukraine's borders.

Britain and the United States have ordered home some staff and their relatives from their embassies in Ukraine, and NATO said it was bolstering Europe's eastern defences.

Moscow insists it has no intention of invading.

Several rounds of talks between Russia and the West have so far failed to ease tensions.

The current fears of a Russian invasion follow Moscow's 2014 annexation of Crimea from Ukraine.