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Cape Town - The rand weakened more than 1% on Wednesday as the US dollar gained for a third straight day ahead of crucial US consumer inflation data due on Thursday.
Investors are keen to scrutinise the data for any clues about the Federal Reserve's next interest rate move.
By 15:04 the local unit was trading 1.21% weaker at R13.17 against the greenback, from an intra-day low of R12.97 and an overnight close of R13.0096.
TreasuryOne dealer Wichard Cilliers attributed the rand weakness to a "combination of risk off and the dollar bouncing back".
"We overshot when we were strengthening and are overshooting once again, but this time on the weaker side," he told Fin24 via WhatsApp.
On the local political front, a court ruling on Tuesday which declared the KZN provincial elections held in 2015 to be unlawful, has created some uncertainty about the ANC party elections scheduled for December. "If that gets pushed out further it would be negative for both the rand and rating agencies," said TreasuryOne dealer Gerard van der Westhuizen.
Citi Velocity economist Gina Schoeman also warned on Tuesday that the growing risk of a postponement of the ANC's upcoming leadership election could have a significant negative impact on SA's ratings outlook, confidence in the country and the rand.
In addition, Moody’s warned on Wednesday that challenges to South African government institutions have eroded their strength and could put the country's credit rating at risk.
Moody's vice-president and senior analyst at its sovereign risk group Zuzana Brixiova specifically referred to the South African Reserve Bank, which has had its constitutional mandate tested by the Public Protector, as well as talks of changing the bank's ownership by politicians.
At the local market’s close, the rand was trading at R13.17/$, R15.69/ € and R17.42/£.
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