South Africa's rand weakened on Monday as the threat of a debt default by Greece sapped market appetite for risky assets, dragging the local currency to a one month low to the dollar. By 1545 the rand had recovered some ground, weakening 0.7 percent to 12.2875 per dollar, having earlier slipped more than one percent to a four-week trough as the Greek crisis deepened, souring sentiment toward emerging markets.
Currencies of the so-called "fragile five" economies: Brazil, Indonesia, India, Turkey as well as South Africa, all suffered versus the greenback on the day, with the rouble, the lira and the rand the hardest hit. "Any rise in global risk aversion translates into rand weakness," Annabel Bishop, chief economist at Investec, said in a note. Forgiving Greece's 1.6 billion euros ($2 billion) debt, due by Wednesday, risked a "moral hazard", Bishop said, as other large debtor countries might be encouraged to renege on austerity measures.