The rand gained over one percent 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 break up 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 8.2334 in the early morning session, compared with a 8.3525 close in New York on Friday.
Analysts say the rand is benefiting from investor relief that there will not be a messy break-up 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 8.20 a tough barrier to break, after the level provided strong rand resistance in May. On the weaker side, it should find support at 8.35.
Investors are expected to keep their focus on Greece in the coming sessions.
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 percent on the three-year benchmark and 8.10 percent on the 14-year paper.
“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 percent target range. A Reuters poll forecast CPI at 5.95 percent from 6.1 percent in April. - Reuters