Johannesburg - The rand gained over 1% against the
dollar in early Monday trade, starting the week on a firmer footing after Greek
elections at the weekend signalled the European country would not immediately
leave the euro.
Emerging markets gained as investors bought into risky
assets once again after fears last week that Greece could leave the euro,
resulting in a messy breakup of the monetary union.
Greek parties who support a bailout won a slight majority at
the weekend election.
The rand strengthened to a week high of R8.2334 in the early
morning session, compared with a R8.3525 close in New York on Friday.
Analysts say the rand is benefiting from investor relief
that there will not be a messy breakup of the euro bloc just yet. However, the
rally is unlikely to last as uncertainty relating to Greece and the rest of the
euro region remains.
The rand is likely to find R8.20 a tough barrier to break,
after the level provided strong rand resistance in May. On the weaker side, it
should find support at R8.35.
Investors are expected to keep their focus on Greece in the
Attention will also be on a Group of 20 meeting where world
leaders are expected to pressure Europe to find a sustainable solution to its debt
crisis which is holding global financial markets hostage.
Yields on government bonds were down 2.5 basis points each
to a fresh record low of 6.075% on the three-year benchmark and 8.10% on the
“Given our expectation that the positive outcome of the
Greek election will support risky assets, a stronger rand and increased
investor appetite for South African assets should push interest rates across
the curve lower today,” RMB said in a note.
Yields are expected to track even lower if data such as
South Africa’s current account figures this week support the view that the
economy is struggling, which would increase expectations of interest rate cuts
from the central bank.
May inflation also due this week is expected to return to
the bank’s 3% - 6% target range. A Reuters poll forecast the consumer price index at 5.95% from 6.1%