Rand near 3-1/2 year highs against dollar

South Africa's rand touched a near 3-1/2-year high against the dollar on the first trading day of 2011 on Monday, backing the case for another interest rate cut later this month.

Reuters data showed the rand briefly went to 6.55/dollar, its strongest level since mid-August 2007. It was at 6.62 by 0647 GMT after closing Friday's session at 6.64.

The rand gained over 10 percent against the dollar in 2010 - translating to a rise of over 30 percent since the beginning of 2009, partly buoyed by foreign capital inflows as investors sought higher yields in emerging markets.

South Africa's central bank trimmed domestic interest rates by 650 basis points between December 2008 and November last year, and some market players expect another cut later this month.

Government bonds also rallied sharply, pushing the yield on the 2015 bond down 11.5 basis points to 7.305 percent and that on the 2026 note down 11 basis points to 8.285 percent.

The JSE's blue chip March stock futures contract edged up 0.39 percent ahead of the 0700 GMT start of trade on the JSE securities exchange. - Reuters