JOHANNESBURG: South Africa's rand extended losses to hit the year's weakest level against the dollar on Tuesday as risk sentiment soured further, though bonds held steady on support from good German growth numbers and a better than expected domestic auction.

News that Greece will hold new elections after leaders failed to form a coalition government focused attention on the possibility it might leave the euro, driving investors to dump risk for traditionally safe assets such as the dollar.

The rand was down 1.0 percent on the dollar at 8.2990 at 1519 GMT, its weakest level this year and off a 8.2175 close in New York on Monday.

The rand broke through 8.24 support once the euro plunged below $1.28, and may head to 8.31 in the next session. Analysts say that even though the rand is over-stretched, exporters could be holding out for 8.50.

But the rand is likely to correct from over-sold levels before trying for 8.50, they added.

Gold prices were at four-month lows, supporting rand bears.

Government bonds were holding steady despite the rand sell-off on what dealers said was local demand for the highly liquid 2015 and 2026 benchmarks.

Yields were at 6.50 percent on the 2015 and 8.405 percent on the 2026, compared with an 11 basis point spike on the 2026 in the previous session.

"We were trading comfortably between 6.49 percent and 6.47 percent on the R157 for most of the session and it was also boosted by the better than anticipated weekly government bond auction," said Richard Farber, a bond trader at World Wide Capital Securities in Johannesburg.

Dealers said the weekly government debt sale came early enough that risk sentiment was still supported by good German growth numbers in the morning.

The Treasury received higher demand for the 2026 and 2018 bonds at an auction earlier in the session than at previous sales of the bonds.

"The bond markets behaved well in light of the rand weakness. I think there has been local institution demand on the R157 and R186," said another dealer in Johannesburg.