JOHANNESBURG: South Africa's rand weakened against the U.S. dollar on Monday, pressured by a gloomy economic outlook and dragged down with other emerging markets by an unrelenting oil sell-off.
By 1530 GMT the local unit had weakened more than 1 percent to 11.7225 against the greenback.
The rand had rallied in early trade after credit agency Fitch maintained its BBB rating and negative outlook, surprising market watchers who predicted it would downgrade Pretoria, as Standard & Poor's and Moody's had done in recent months.
The relief at avoiding another downgrade was, however, short-lived as traders chose to focus on Fitch's gloomy tone, after the ratings agency highlighted concerns about South Africa's gaping current account and budget deficits.
"While it might have given us a bit of a reprieve, the currency is telling us there is trouble ahead," said Cheslyn Francis, a portfolio manager at Afrifocus Securities.
"We might have dodged a downgrade this time but it could be a different story next time."
The rand was also undone by global risk aversion as oil fell to a fresh 5-1/2 year low, sending investors into safe-haven currencies like the Japanese yen.
Yields on local bonds recovered earlier losses, with government paper due in 2026 ending up at 7.980 percent, from 7.975 in the previous session.
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