The rand fell over two percent on Tuesday, hitting its weakest level since 5 December.

The currency was trading at 10.37 to the dollar at 1.31pm and by 3.48pm it had recovered only slightly to 10.33.

"Most emerging market currencies are doing badly," a local rand trader told Sapa.

"Investors are turning away from emerging markets as they see them as risky at the moment," he said.

The rand usually follows the euro as the European Community is South Africa's largest trading partner and on Tuesday, the euro saw losses on concerns about the euro zone economy and European banks.

"Yes, the rand has a close relationship to the euro – but I still think it's the emerging market idea that's putting investors off and not the euro," the trader said.

He emphasised that the day belonged to the dollar.

"It's all really a dollar story – and there's a little bit of 'Obama good news' in the market.

"Mainly though, it seems that investors think that the dollar is the place to put your money as the US now seems to have weathered the meltdown and not much more bad news is expected out of America," the trader said.

Sapa