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The rand slumped almost 2% on Tuesday, tracking a bruised euro, which extended losses as political uncertainty in Italy stoked fresh fears about the eurozone.
"The rand weakness is mostly of the back of eurozone uncertainty and dollar strength as a result," said GT247.com trader Barry Dumas.
"There is broad weakness across emerging market currencies, including the rand, mainly as a result of the strength in the US dollar. The dollar has strengthened in response to the sell-off in Italian bonds, which have resulted in a weaker euro," said Musa Makoni, trading specialist at GT247.com.
"As investors sell-off the euro we expect to see more demand for the US dollar which will lead to more weakness for the rand as well as other emerging markets currencies," he added.
By 13:50, the local unit was trading 1.72% weaker at R12.68 to the greenback.
Dumas added: "The R12.73 level giving some resistance but a break from there can see the ZAR price weaken back to R13 levels."
Makoni cautioned investors and traders to watch the benchmark Italian 10-year Treasury yields for indications on the situation in Italy, and potential movements on the euro as a result.
"There are fears that the new Italian government could push for Italy to exit the European Union, which could spell more uncertainty for the bloc."
On Tuesday morning, yields on Italy's key 10-year bonds surged to 235 points above those of benchmark German bunds, its highest level in more than four years, in a sign of falling confidence among investors, reports AFP.
Makoni said locally, we were also seeing a sell-off in Treasury bonds, as the benchmark 10-year Treasury yields had risen to 8.53%.
AFP reports that Italy, one of the European Union's biggest economies, has been plunged into crisis after President Sergio Mattarella at the weekend vetoed the new government's nomination of a fierce eurosceptic as economy minister.
The move led the country's prime minister-elect to step down, meaning the collapse of a bid by the populist Five Star Movement and the far-right League to form a government.
Mattarella then named Carlo Cottarelli, a pro-austerity economist formerly with the International Monetary Fund, to lead a technocrat government, with another election likely in the autumn.
The chaotic developments have spooked investors, who fear another election could see a better result for the essentially anti-EU parties.
According to AFP, a brewing crisis in Spain, where Prime Minister Mariano Rajoy faces a no-confidence vote after his party was found guilty of benefiting from illegal funds in a massive graft trial, is adding to the selling pressure.
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