JOHANNESBURG: The South African rand languished near a two-week low against the dollar in early trade on Wednesday, and traders said the currency would probably test weaker levels amid negative risk sentiment.
Local trade has been taking direction from the battered euro currency, as investors dump riskier assets and push into the relative safety of the US dollar.
Analysts say as long as Europe's crisis remains unresolved, any risk appetite is unlikely to last for long.
Domestic consumer inflation, due at 0800 GMT, is seen to have crept higher and breached the top of the central bank's 3-6 percent target, touching 6.2 percent in November, suggesting prices may be rising faster than the central bank expected.
Inflation was at 6 percent in October and the bank has predicted a 6.3 percent peak in the first quarter of next year.
The rand was 0.36 percent firmer at 8.3300 against the dollar by 0646 GMT near a two-week low and compared to the close of 8.36 on Tuesday.
"The biggest risk to the rand remains the potential deleveraging from offshore investors and as such we suggest buying dips for the 8.45/8.50 target," said Brigid Taylor of Nedbank Capital, adding market participants lack serious conviction, due to the coming holidays.
Government bonds continued their weaker trend with the yield on the four-year bond up 6 basis points to 6.96 percent, and that on 15-year rising 5 basis points to 8.635 percent.
South Africa's government has finished its fixed income bond auctions for the year, the next auction is scheduled for Jan. 10.