South Africa's rand fell more than 1.7 percent against the dollar on Monday, with dealers citing speculation of a cross-border deal between a local company and a Canadian firm as the driver.

The rand hit three-week high at 7.7715 to the dollar earlier in the day but later reversed course to hit a session low of 7.9675. By 1429 GMT, it was trading at 7.9590.

There's been a rumour going around in the market of a South African-Canadian M&A and the story has been: buy Canadian and sell rand. So, this move is giving credence to that rumour, said Warrick Butler, dealer at Standard Bank.

It's been in this 7.80 to 8.00 range for a while now and I'd be very concerned if goes above 8.00 that we could perhaps have another go at 8.50.

There have been no reports of such a tie-up.

Monday's losses put the rand at the bottom of the log of global emerging market currencies tracked by Reuters on the day.

Government bonds also turned negative on the day, with the yield on the 2015 bond up 3.5 basis points to 6.735 percent and that on the 2026 note rising three basis points to 8.415 percent

The rand was 1.3 percent weaker to the Canadian dollar on the day and was also more than one percent weaker against the euro and sterling.

Also putting pressure on the rand were comments from the German finance minister that an upcoming European Union summit would not solve the region's debt crisis.

A G20 meeting at the weekend that urged Europe to find a solution to a debt crisis had encouraged investors to take on riskier assets.