Johannesburg - South Africa's rand firmed in thin trading on Monday due to growing optimism about a deal to tackle the United States “fiscal cliff” and hopes that the euro zone might be resolving its debt crisis.

The rand was at 8.8217 to the greenback at 15h27 GMT, firmer than Friday's New York close of 8.8670.

“The market is interpreting it as a positive progression to a deal on that fiscal cliff matter,” said Sean McCalgan, a market analyst at research house ETM.

“Whether it turns out to be all that positive is another thing all together, but for now the fact that there's belief to be progress is a positive for short-term risk sentiment.”

US Congressional leaders said on Friday they would be flexible in efforts to settle differences to avert a $600-billion “fiscal cliff” of tax hikes and spending cuts, comments that helped lift non-dollar currencies such as the euro.

South Africa's currency found further support, moving further from the psychological 9.00, on hopes that a deal may be in the works for more funding for Greece at a euro zone finance ministers' meeting on Tuesday.

Despite the rand performing in line with 20 emerging market currencies monitored by Reuters, focus remains on domestic labour unrest in the agricultural sector, which could increase pressure on the rand.

Government bonds were flat, with the yield on the benchmark 2026 paper and the four year note at 5.455 and 7.640 percent respectively. - Reuters