Johannesburg - The rand fell to its lowest in nearly four years against the dollar on Thursday as investors concerned about the political risk from labour unrest and violent protests opted for other emerging market assets.
Government bonds followed suit, with latest data from the JSE securities exchange showing foreign accounts are set to be net sellers of local debt again this week, after dumping about R6bn of paper last week.
The yield on the heavily traded 2026 edged up 2.5 basis points to 7.345%. That on the shorter-dated issue due in 2015 was up 1.5 basis points at 5.39%.
The rand briefly touched R9.0860, its weakest level since April 2009 before coming back to R9.0377 by 08:43, compared with Wednesday's close at R9.06.
The currency tumbled more than 2% on Wednesday, breaching the psychologically key R9.0 level as investors fretted about the outlook for the local economy, hit by wildcat strikes which have roiled the mining sector in particular since August last year.
"We are getting weighed up against our peers and we are unfortunately being found wanting because sentiment locally is not very good," said Bidvest Bank chief dealer Ion de Vleeschauwer.
"We continue to have labour issues and protest action around the country. When you look at those things and you're an investor, you look at other emerging markets which give you the same kind of yields - maybe even better - with a lot less risk."
Adding to the woes for Africa's biggest economy, the IMF on Wednesday cut its 2013 growth forecast for South Africa to 2.8% from 3%.
The weaker rand poses upward risks to the inflation outlook and reaffirms the likelihood that the Reserve Bank will keep rates on hold at 5.0% later on Thursday, when it concludes a three-day policy meeting.
Follow Fin24 on Twitter, Facebook, Google+ and Pinterest.