The rand firmed in the morning session on Monday on the back of a weak dollar. The local currency is expected to target 7.44 against the greenback.

At 8.58am the rand was bid at 7.5026 to the dollar from 7.5052 at its previous close. It was bid at 11.2045 to the euro from its previous close of 11.1693 and was at 12.5345 against sterling from 12.5018.

The euro was bid at $1.4932 from $1.4873 overnight.

A local Forex trader said: "The dollar has been getting kicked in the teeth again. We will look to target 7.44 against the greenback, and considering we were at 8.00-8.20 not too long ago, we have come a long way in a very short space of time."

RMB analysts John Cairns and Nema Ramkhelawan said that the Economic Planning Ministry is to convene with unions and business to discuss the strong rand.

"I would suspect that this leads to angry discussions, but probably not much more in the way of government action. An unknown here is the attitude of incoming SARB Governor Marcus, but the bottom line is that the Reserve Bank as an institution has a clear policy towards non-intervention and I would guess that she will follow the same line. It is interesting here also to note that the local market is starting to seriously toy with the idea that we will have another rate cut in the cycle," said Cairns.

"This contrasts sharply with the global trend, which is now towards hiking. But, even if we do get another cut - which is not our view - the absolute level of rates will still be very favourable to the ZAR and we shouldn't expect any fall-out," he said.

RMB said that the G20 furthermore failed to address the US dollar weakness, maybe leaving euro/US dollar free to test 1.50 again this week - and, in response, gold has already pushed to new highs above $1100 an ounce.

"The overall environment remains rand positive - and probably most importantly US dollar negative. Two concerns stand out. First, the rand has run ahead of most of its compatriot currencies. Second, as and when we approach new lows fears of and actual reserve activity might limit downside," the analysts concluded.

Dow Jones Newswires reported that the euro rose against the dollar and yen in Asia Monday as stronger regional share markets prompted Asian hedge funds and other short-term players to buy the riskier common currency.

Any further gains in global equities later in the day may keep the currency poised to move upward, dealers said.

"The dollar is likely to remain weak against currencies like the euro," as players betting on further global economic recovery continue to channel assets into more attractive, higher-yielding investments, said Hiroshi Maeba, executive director of foreign exchange trading at Nomura Securities.

Bonds slightly weaker

Bonds were offered a little weaker in early trade on Monday ahead of the Transnet and government auctions. The rand was steady and thus not exacting much of an impact after being a strong leader last week.

By 9.03am, the short-term government R154 bond was bid at 7.045% from a previous close of 6.965%. The medium-term R157 was bid at 8.310% from 8.280%, while the long-term R186 was at an unchanged 8.890%.