Johannesburg - South Africa's rand held steady against the dollar on Monday, starting the week with a firmer tone after the central bank raised interest rates late last week and global risk aversion abated.

At 08:47 SA time, the rand traded at 10.6250 to the dollar, at its strongest since the start of the month, and compared with a 10.6420 close in New York on Friday.

Global markets were calm on Monday after risk appetite was sapped by the downing of a Malaysian airliner in Ukraine last week, allowing the rand to retain some of its glow after the South African Reserve Bank hiked interest rates by 25 basis points to 5.75 percent to stem inflationary pressures.

“After the SARB hiked rates due to persistent upside risks to the inflation outlook, June's CPI print should confirm that the bank took appropriate action and may offer the rand some short term support,” analysts at 4Cast wrote to clients.

South Africa will release inflation numbers for last month on Wednesday.

However, with that the only piece of data on the calendar this week, the rand is expected to seek direction offshore and many lose some shine.

“We prefer to maintain a constrictive outlook on dollar/rand given escalating tensions between Russia and the West, exacerbated by the downing of Malaysia Airlines flight MH17 in Ukraine's Donetsk region, as well as geopolitical risk factors in the Middle East,” 4Cast added.

Yields on government bonds were unchanged at 8.07 percent on the benchmark 2026 issue and at 6.595 percent on the 2015 note. - Reuters