The rand plummeted against the dollar in early morning trade on Monday - hitting a year low - as it tracked a wilting euro and as risk appetite waned.
"The rand weakened quite dramatically in line with the euro move, which came on the back of the perceived inability of European politicians to get on top of the eurozone crisis," a local currency trader said.
He put dollar rand in a range of 7.50 to 7.60 for the initial part of the session.
At 8.29am local time, the rand was bid at R7.5526/$ from its previous close of R7.4568/$. It was bid at R10.3302/€ from R10.2151/€ before, and at R11.8559/£ from R11.7955/£ previously. The euro was at $1.3674 from $1.3702 before.
Standard Bank analysts said in a note that the rand's weakening bias was back in evidence on Monday morning as last week's brief improvement in risk appetite dissipated.
"While major central banks last week pledged to extend three-month loans to European banks to prevent the debt crisis becoming a liquidity crisis, EU finance ministers failed to deliver a solution to counter the region's worsening debt crisis this weekend, which has resulted in renewed risk aversion."
Standard Bank noted that Asian markets had opened in the red on Monday morning and commodity prices were generally softer.
"Thus, we expect the rand to remain on the back foot for most of the first half of the week. Later in the week, the FOMC rate decision, US housing data and EU confidence data will provide additional insight into global growth prospects.
"Should this data prove disappointing, global growth fears could see the rand weaken further."
Standard Bank also expected the SA Reserve Bank's MPC meeting to provide some direction for the currency this week.
"Though we do not expect the MPC to announce a change in the repo rate on Thursday, should the MPC's statement prove dovish or signal an increased possibility of a rate hike over the coming months, the risk is that the rand may strengthen on the back of renewed appetite for SA equities and/or see non-residents add to their existing bond positions - which they have been lightening recently."
Meanwhile Dow Jones Newswires reported that in Asia on Monday, the euro extended Friday's losses against the US dollar and the yen as markets were unconvinced that European policy makers were prepared to act decisively to contain the region's debt crisis.
"It continues to sound like there is little coordination among the EU leaders to resolve the crisis," said BNZ currency strategist Mike Burrowes in Wellington.
