JOHANNESBURG: South Africa's rand rallied on Monday, brushing aside local political ructions as investors increased bets on further monetary easing by the European and US central banks.

At 1500 GMT the rand was 0.75% firmer at 13.8500 per dollar after closing at 13.9500 on Friday. Most of those gains came in the latter part of the session, with offshore investors in particular lured by the rand's healthy carry return.

The European Central Bank is expected to lower its key deposit rate on Thursday while the US Federal Reserve is expected to cut rates on July 31, prompting investors to look to high-yielding emerging markets assets.

South Africa's central bank (SARB) cut its own key rate last Thursday, but looks unlikely to ease further this year, and with inflation trending lower, the rand and local bonds have continued to draw buyers despite a political storm brewing around President Cyril Ramaphosa.

"Consumer prices, like the SARB said last week, will remain subdued so the rand remains an attractive carry trade," said trader at IG Markets Shaun Murison.

On Friday the head of the government's anti-graft ombudsman said Ramaphosa had violated the executive ethics code over a donation to his 2017 campaign for the leadership of the African National Congress (ANC) party.

On Sunday Ramaphosa said he would go to court to overturn the finding.

"We know that anything that has to go through the judicial system takes a long time so the rand hasn't been affected much. So far it's been about how much the US will cut rates," said Murison.

Bonds were weaker, with the yield on the benchmark 2026 government paper up 1 basis point to 8.03%.

On the stock market, shares fell alongside emerging market equities, with companies earning in foreign currencies hit by the rand's rally, while the introduction in China of a Nasdaq-styled index hurt existing indices.

The benchmark JSE Top 40 Index closed 0.4% down at 51,891 points while the broader All-Share Index also fell 0.4% to 58,015 points.

"The Chinese market's relatively weak. And the rand's a little bit stronger today as well, so that's putting a little bit of pressure on the rand hedges at the moment," said portfolio manager at Independent Securities Michele Santangelo.

Tobacco producers British American Tobacco (BATS) and Remgro were at the bottom of the blue-chip index, with BATS down 2.3% and Remgro slipping 1.7%.