Rand higher against dollar

Johannesburg - The rand started the week on a firmer note on Monday, maintaining gains below the psychologically important R8.00 level in what may indicate the firmer bias will hold for now.

Sentiment has been lifted after German Chancellor Angela Merkel and French President Nicolas Sarkozy pledged at the weekend to do what is necessary to shore up banks and settle the Greek debt crisis.

The rand firmed more than 1.4% to the dollar, hitting a session high of R7.8827. By 06:50, it was trading at R7.905, compared with Friday's New York close of R8.00.

"The move this morning suggests that a test of R7.86 is on the cards with risk sentiment buoyed by the Sarkozy-Merkel promise of a bank recapitalisation plan by the end of the week," said Christopher Shiells, emerging market analyst at IGM.

Standard Bank said in a note the rand could gain further as global stocks rally and commodity prices are on the rise.

Government bonds followed the rand with benchmark yields at multi-week lows.

With a thin local calendar this week, the rand will take its cue from international developments.

Manufacturing data on Wednesday should give signals about third-quarter economic growth. Production fell by 6% year-on-year in July and another contraction could strengthen calls for a further rate cut, which would boost bonds.

As the rand has recovered from 28-month lows of R8.4950 hit in September, rates on forward rate agreements have eased, as the market is re-pricing in another rate cut.

On fixed income, the yield on the 2015 issue was down 6.5 basis points to 6.675%, near its lowest in almost a month. The 2026 yield fell 7 basis points to 8.37%, near its lowest in three weeks.

Domestic stocks futures pointed to a firm start on the bourse, with the JSE's Top 40 - (Tradeable) [JSE:J200] December futures contract up 0.7% before the start of trade.