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Johannesburg - The rand fell to its weakest in a week on Wednesday as a ratings downgrade on top banks hit sentiment locally while upbeat US economic data supported dollar bulls.
The rand initially held its own against the US dollar rally the previous session, however a Moody's downgrade of South Africa's four largest banks after the stock market close saw the rand notch up another daily loss.
Read: Moody's cuts ratings of four more top banks
At 08:10 on Wednesday, the unit hit a session low so far at R10.6795/$, down over 0.3% on its previous close and at its weakest since August 12.
"Last night's rand jump seems a bit extreme. Mostly a Moody reaction rather than being an able reflection on what's going on, so some pullback is possible this morning," John Cairns, currency strategist at Rand Merchant Bank said in a market note.
"Still, the trend on dollar/rand is clearly towards the upside on the R10.50 to R10.80 narrow range."
The currency now looks headed for four days of daily losses. It has been in a weakening trend since it balked from testing R10.5000 resistance last week.
The rand's direction will hang on inflation expectations this morning.
Statistics South Africa will release July CPI data at 10:00. Economists expect a pullback to 6.4% on the year-on-year figure, from 6.6% the previous month.
Expectations that the South African Reserve Bank will keep its hand on the trigger during the current monetary tightening cycle have braced the rand, and if the data prints in line with forecasts or lower, it would confirm the bank is taking the correct stance in hiking interest rates.
Yields on government bonds were up 4 basis points at 8.3% on the benchmark 2026 issue and at 6.63% on the paper due next year.
Treasury will announce issuance plans for its weekly sale of fixed income paper at 11:00.
Also read: SA's banking sector is healthy - Sarb
