But skepticism about the deal remained, leaving the rand vulnerable to further weakness if debt auctions across Europe disappoint this week.

The debt crisis in the euro zone has been the main driver of markets in recent months, with investors worried that leaders in the region are failing to contain it.

The rand has been extremely volatile, falling to a 2-1/2 year low of 8.61 last week and the cost of domestic debt in the fixed income market rising to four-month highs.

The rand started the week on a positive note, trading at 8.4210 against the dollar at 0649 GMT, 1.27 percent firmer than Friday's New York close of 8.5290.

"Although we are still trying to confirm it, the Italian story did boost the market when it came out this morning," said Jim Bryson, chief dealer at Rand Merchant Bank.

"There's support for dollar/rand at 8.40 but the rand was oversold around 8.60 on Firday and if it can get through that, we will look towards 8.30."

Bonds followed the rand firmer and yields - which move inversely - were off multi-month highs. The yield on the 2015 bond fell five basis points to 7.04 percent while the 2026 yield fell four basis points to 8.625 percent.

The local market is poised for third quarter economic growth figures on Tuesday, which are expected to show GDP growth quickened to 1.8 percent quarter-on-quarter from 1.3 percent in the second quarter.

A better-than-expected outcome should leave the market leaning towards a no-interest rate cut view but an uncertain global outlook and rising inflation make "this balancing act all the more difficult to gauge at this juncture," Absa Capital said in a note.