Graphic: renjith krishnan

South Africa's rand briefly touched a fresh 1-1/2 week high against the dollar early on Monday but looked unlikely to rally much further as uncertainty remains over Europe's liquidity problems.

The rand initially climbed to 8.1525 against the greenback, its strongest level since June 20, before coming back to 8.1850 by 08:51 SA time, down 0.26 from Friday's close.

The local currency jumped as much as 2.7 percent against the dollar on Friday, recording its biggest daily gain since late November 2011, as renewed optimism about a solution to Europe's debt problems fired up risk appetite.

But the rand remains vulnerable to any new bouts of disappointing news out of the euro zone, South Africa's main trading partner bloc, Tradition Analytics cautioned.

“Investors should be wary in believing that the latest bout of rand strength will be sustained indefinitely,” it said.

“Whilst the local unit may gain even more ground in the short term, the situation abroad is very fluid.”

On the local front, the June purchasing managers' index due out at 11:00 SA time should offer the latest pointers on the state of South Africa's economy, with some market players now pricing in the chance of an interest rate cut later in the year to boost growth.

Government bonds were unchanged from Friday's levels in early Monday trade, with the yield on the benchmark three-year bond steady at 6.01 percent as was the longer-dated 2026 paper at 7.935 percent. - Reuters