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Johanneburg - The rand stumbled more than 1% against the US dollar on Tuesday to its weakest in nearly six months, as confidence in the economy took another knock from a wider than expected current account deficit.
The shortfall on the account expanded to 6.2% of GDP in the second quarter from 4.5% in the first as wage strikes hit exports. It was the biggest gap since the 6.8% recorded in the third quarter of 2013.
Economists polled by Reuters last week expected the gap to widen to a more moderate 5.45%.
The rand sank as low as R10.9490/$, a level it last touched in late March. It traded at R10.9300/$ by 15:43 GMT, 1.08% weaker than Monday's close in New York.
Government bonds weakened alongside the rand, pushing the yield on the 2026 paper, the benchmark for the secondary market, up 9.5 basis points to 8.19%.
A persistently wide current account gap and nagging budget deficits since a 2009 recession have earned the rand a place among the so-called "Fragile Five" - emerging market currencies most vulnerable to global flights from risky assets.
South Africa's current account deficit has traditionally been covered by non-resident portfolio flows, which are prone to sudden reversals during global market volatility.
"We are becoming more convinced that the increase in dividend and portfolio repatriation flows that helped to stabilise the rand earlier in previous quarters was opportunistic," said UBS strategist Manik Narain in a note.
This increase was unlikely to be seen again unless the rand weakened further, Narain said.
"More fundamentally, South Africa is still showing very limited evidence of the economic healing that is needed to adopt a more constructive view on its markets."
