The rand fell against the dollar on Friday and looked set for its worst quarter in over two years as investors trim exposure to risk going into a weekend, remaining unconvinced that the euro region's debt crisis will be solved.
Thin liquidity added to the rand's woes, exaggerating losses as the rand climbed back above the 8 rand per dollar level, which also pushed government bond yields higher.
Foreigners dumped South African debt this week and there was little demand from the domestic market, with the yield on the 2015 note ending 10 basis points higher at 6.99 percent and that on the 2026 issue adding 9.5 basis points to 8.62 percent.
The rand lost 2.2 percent to the dollar in the session, as dealers sought to hold the U.S. currency going into the weekend, seen safer than emerging market assets. The currency has lost around 18 percent in the third quarter.
At 1600 GMT, the rand was trading 0.52 percent weaker against the dollar to 8.0220, recovering somewhat from the session low of 8.1599 hit around midday, a move dealers say was exaggerated by low volumes. It closed at 7.9805 in New York on Thursday.
Dealers closing off the third quarter's trades contributed to a lack of activity in the market on Friday, after some investors have stayed out this week waiting to see if Europe's debt problems will be sorted out or if the global economy will continue to drag.
Volumes weren't great this whole week, liquidity has been fairly skittish. This is month-end so everybody is squaring up all their exposures, nobody wants to sit with massive exposure over the weekend, said Ion de Vleeschauwer, a trader at Bidvest Bank.
The currency has retreated back above the psychologically key 8 rand level, after managing four days of gains since it hit a 28-month low of 8.4950 last week.
It is an unconvincing close for the week in terms of any long term resolution for the European crisis. I fear that as long as the current situation continues, the dollar will be the currency of choice, said Bidvest's de Vleeschauwer.