Filomena Scalise

Johannesburg - South Africa's rand fell to a new 2012 low against the dollar on Wednesday and was among the hardest hit by a stampede away from riskier assets with investors unnerved by the deteriorating euro crisis.

The European debt crisis appeared to deepen on Wednesday with Italian and Spanish bond yields climbing again and showing the vulnerability of the currency union.

The rand lost 2.5 percent against the dollar and fell to a six-month low of 8.5250 in the afternoon session. It closed at 8.32 in New York on Tuesday.

It was the weakest-performing currency in a basket of emerging market currencies trading against the dollar and tracked by Reuters, with investors using the rand to hedge other risky positions.

Having broken through previous support at 8.45 and 8.50, dealers say 8.60/61 is next up during the wave of heavy selling.

“We are now in the panic phase of the sell-off, and risk markets are very fragile, so moves could be much more violent and quicker to the downside. The rand is now open to 8.60,” said Brigid Taylor, trader at Nedbank.

Dealers say that with the euro - the currency of South Africa's major trading partner - looking towards $1.22, the rand may suffer the worst of the brunt against risky assets.

A close above 8.50 on dollar/rand signals November 25 levels of 8.61 and the fall could go as far at 8.80.

The rand is one of the more liquid emerging market currencies, and dealers say they often use it to hedge other risky emerging market positions where the market may not be as liquid.

However, exporters could be attracted to come into the market at current levels around 8.50 and provide some respite to the rand.

Yields on government bonds were slightly higher but should start reflecting the sharp fall in the rand by the next session.

The benchmark 2015 bond yield was up two basis points at 6.41 percent while the 2026 issue added three basis points to 8.375 percent. - Reuters