The volatile rand's decline continued in afternoon trade as depressed global sentiment on the Spanish banks' and eurozone debt crises escalates.
According to Barclays Bank Spanish banks were in the eye of the storm following the EUR19bn injection into Bankia late last week .
The rescue did little to relieve Spanish assets: sovereign debt yields were higher and the IBEX equity index lower yesterday. European banks remain vulnerable to contagion absent a decisive action from the European authorities the bank said.
At 15:06 the rand was bid at R8.4692 to the dollar from Tuesdays close of 8.3086. It was bid at R10.5179 to the euro from Tuesdays close of R10.3710 and at R13.1841 against sterling from R12.9874 at Tuesdays close.
The euro was bid at US$1.2426 from Tuesdays close of $1.2477.
The rand deteriorated aggressively with risk appetite at extreme lows. The political uncertainty in Greece and the comments that the ECB wasnt comfortable with the bailing out of Bankia impacted the market said a local trader.
Dow Jones News wires reported that the euro depreciated on Wednesday to its weakest level against the dollar in almost two years as a disappointing Italian bond auction mounting concern over Spain's banking industry and a drop in eurozone confidence data weighed on the common currency.
The euro sank to as low as $1.2433 against the dollar. Currencies perceived as a refuge from eurozone turmoil such as the dollar and Japanese yen were the main beneficiaries of the euro's weakness during European trading hours.
The ICE Dollar Index which tracks the greenback against a basket of currencies hit its strongest level since September 2010. The yen gained against both the dollar and euro. The greenback sank to Y79.01 against the yen while the euro slid to Y98.27 its weakest since January 23.
The euro steadied later in the session after the European Commission floated the idea that the 17 countries that used the euro should consider setting up a "banking union" that allowed them to share the burden of bank failures.
Bonds softer on weak rand
South African bonds were softer in afternoon trade on Wednesday on the back of a weak rand as risk aversion sent investors scurrying for the relative safe haven of the US dollar.
Bonds have been under pressure for most of the day due to the weaker rand but the flight to safety has provided some support for our bonds a local trader said.
At 15:40 the benchmark R157 bond was trading at 6.390 percent from Tuesdays close of 6.380 percent. The R207 was trading at 7.630 percent from a previous close of 7.605 percent and the R186 was trading at 8.360 percent from its close of 8.330 percent.