* C.bank lifts key rate by 75 bps to 7.5% * Rouble jumps to near 16-month high vs dollar on rate hike * Rouble hits 69.8150 vs dollar, touches 81.2825 vs euro * Higher rates make rouble assets more attractive, says c.bank (Updates prices, adds c.bank comment, bullets) MOSCOW, Oct 22 (Reuters) - The Russian rouble jumped past 70 versus the U.S. dollar for the first time in almost 16 months on Friday after the central bank hiked its key rate by a more-than-expected 75 basis points to 7.5%, before slightly paring gains. The bank was widely expected to increase its key rate from 6.75%, increasing the cost of lending for the sixth time so far this year as it struggles to rein in inflation, its main area of responsibility. Still, the bank surprised markets with the sharpness of its hike. “For the rouble, this is a generous gift and the Russian currency will rise,” said Dmitry Polevoy, head of investment at Locko Invest. By 1329 GMT, the rouble was 0.9% stronger against the dollar at 70.45, after leaping to 69.8150, its strongest level since June 29, 2020, in the minutes after the decision was announced. It had also firmed 0.8% to trade at 81.97 versus the euro , touching 81.2825 after the decision, its strongest mark since July 2020. Higher rates are positive for the rouble, which is also supported by month-end tax payments that prompt export-focused companies to convert some of their revenues to meet local liabilities. “Raising the rate certainly makes rouble assets more attractive and not just for foreign investors, but for our citizens too,” Central Bank Governor Elvira Nabiullina said. The market was also keeping an eye on surging COVID-19 cases in Russia that have already spurred authorities to announce lockdown measures. The daily death toll from the virus hit a record high for the fourth day running. Moscow decided to reintroduce lockdown measures from Oct. 28, with supermarkets and pharmacies the only shops allowed to stay open. Some other regions have announced similar measures. Lockdowns and related restrictions could damage the economy just as it is facing the risk of more expensive lending, though Nabiullina said their effect would likely be limited. Brent crude oil, a global benchmark for Russia’s main export, was up 0.8% at $85.32 a barrel, supporting Russian stock indexes. The dollar-denominated RTS index rose 1.4% to 1,894.4 points. The rouble-based MOEX Russian index was 0.5% higher at 4,237.9 points, near an all-time high of 4,292.68 hit last week. (Additional reporting by Andrey Ostroukh and Anastasia Lyrchikova Editing by Mark Heinrich and Mark Potter)