The rand is likely to remain under pressure in line with an embattled euro, the currency of South Africa's main trading partner Europe, even though International Monetary Fund head Christine Lagarde sounded a more optimistic tone for the struggling region's outlook.

By 0640 GMT the rand was at 8.1750 to the dollar, 0.14 percent firmer than Friday's New York close at 8.1867.

However, it was off Monday's opening level of 8.15, edging weaker after central bank data showed South Africa's net gold and foreign exchange reserves dipped to $47.867 billion in December from $48.633 billion in November.

"The decline in reserves/slower pace of accumulation is negative for the rand's fundamentals and the currency could thus come under some pressure," Standard Bank analyst Nomvuyo Guma said.

"South Africa's reserves remain small in relation to other prominent emerging markets and boosting reserves is seen as critical in limiting the rand's volatility."

The rand plunged nearly 22 percent against the dollar in 2011, one of the steepest falls globally, bearing the brunt of an emerging market sell-off as investors fretted over the effects of a debt crisis in the euro zone.

But Europe may avoid a recession this year and there are reasons to be more upbeat about prospects for the region, the Business Day newspaper quoted the IMF's Lagarde as saying.

South African government bonds were not entirely spared from last year's sell-off although their high-yield appeal cushioned them somewhat.

On Monday the benchmark 2015 and longer-dated 2026 issues were weaker, pushing yields up 2.5 basis points to 6.875 percent and 3.5 basis points to 8.67 percent respectively.

Copyright Reuters, 2012