South Africa's rand steadied against the dollar on Monday and was seen volatile and taking cue from international markets, while stocks opened lower on the bourse. By 0703 GMT, South Africa's blue chip Top-40 index was down 0.36 percent. The rand was trading at 10.45 against the dollar, not far off its last New York close of 10.4550 on Friday. "The rand is likely to stall further this week as it unwinds from last week's extremes. The divergence signal suggests that dollar/rand could go to the low of the 10.10/10.65 area before the larger uptrend resumes to 10.80 and beyond." said Absa Capital in a note. The rand fell to a 3-month low of 10.66 last week on risk aversion and some analysts said it may have been overdone. "Rand losses looked overdone but it takes a degree of foolhardiness to pick a top as global equity slide continues," said market analysts 4CAST in a note. "That said there were some more encouraging signs of resilience into the weekend and although volatility is likely to remain elevated we believe 10.80 (to the dollar) will cap any fresh leg higher." South African government bonds were slightly firmer. The yield on the 2015 bond was down 2 basis points to 7.82 percent and that on the 2036 issue fell by the same margin to 7.99 percent. The domestic economic calender this week has manufacturing output data on Thursday. The manufacturing sector is deep in recession and output fell by its biggest margin in 10 years in December. The central bank is expected to ease monetary policy further this year, after cutting rates by 150 basis points since December. Interest rates increased by 500 basis points between June 2006 and June 2008.

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