Investors were also focusing on an expected cabinet shake-up under new President Cyril Ramaphosa and the future of Finance Minister Malusi Gigaba, who is due to deliver the budget speech today.
South Africa is holding on to its only remaining investment credit rating from Moody‘s, which is widely expected to use the contents of the budget to decide its next move.
“The key determinant of whether South Africa will receive a downgrade from Moody’s is tomorrow’s (today’s) budget,” said Annabel Bishop, chief economist at Investec.
At 5pm, the rand bid at R11.7450 to the dollar, 5.69cents softer than at the same time on Monday. It was still within a striking distance of a three-year high of R11.56 scaled last week with the resignation of Jacob Zuma as president.
In fixed income, government bonds were flat, with the yield on the benchmark instrument due in 2026 at 8.1percent.
On the bourse, stocks dropped sharply, led by retailers, amid concerns the budget would unveil tax proposals that would put pressure on consumer spending.
The benchmark JSE Top40 index fell 1.35percent to 51020.46 points, while the all share index dropped 1.32percent to 57928.75 points.
General retailers led the bourse lower, with Mr Price down 4.29percent to R273 and Shoprite 2.69percent weaker at R240.44.
“It’s probably in anticipation of a bad budget tomorrow (today), the market probably pricing in not very good news ... The sector that is most going to be hurt is the retailers,” said BP Bernstein trader, Vasili Girasis.
AngloGold Ashanti fell 3.77percent to R116.24 after posting lower annual earnings.
Meanwhile, the Standard & Poor’s 500 index and the Dow Jones industrial average had slipped after six consecutive days of gains yesterday afternoon, hurt by disappointing quarterly results from Walmart and a rise in bond yields.
The Dow Jones was down 0.32percent at 25138.98 points and the S&P500 had lost 0.17percent to 2727.46 points.