JOHANNESBURG: South Africa's rand gained against the dollar early on Monday as resource-heavy currencies were supported by higher commodity prices and global monetary stimulus was expected to support inflows to emerging market bonds.
Dealers expect that the European Central Bank (ECB) will cut interest rates later this week, driving investors to higher yielding emerging markets such as South Africa.
"Monetary policy accommodation beyond our borders benefits the rand mainly via the support it offers to the global reach for yield play, and thereby to flows to peripheral bond markets, including the South African bond market," said Bruce Donald of Standard Bank in a client note.
At 0650 GMT, the rand was at 9.07 to the dollar, 0.36 percent firmer than its previous close in New York on Friday.
The South African currency is likely to firm towards the key 9 rand psychological level, hitting resistance at around 9.05, one technical analyst said.
Risks to the rand's rally will come on Tuesday from local trade data. A record shortfall in the January trade balance triggered a 1.5 percent fall against the dollar in February.
The beginning of wage negotiations in the mining sector in May may also keep the rand under pressure, with increasingly militant mine workers expected to resort to violence to press their demands during the salary talks.
South African government bonds were steady at 6.855 percent on the 2026 benchmark bond and 5.235 percent on the 2015 note.
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