The rand slumped to a 2 1/2-month low against the dollar as U.S. data bolstered speculation the economy is strong enough for the Federal Reserve to start raising interest rates.
The rand declined as much as 1.1 percent, and traded 1 percent down at 12.2752 per dollar by 5 p.m. in Johannesburg. A close at that level would be the weakest since March 19.
The dollar strengthened against 23 of 24 emerging-nation currencies monitored by Bloomberg after a report showed U.S. manufacturing grew more than forecast in May. The currencies are also under pressure as Greece struggles to seal a bailout accord with the International Monetary Fund, damping demand for higher-risk assets.
“The imminent Fed hike remains the key structural risk” for the rand, Mohammed Nalla, head of strategic research at Nedbank Group Ltd. in Johannesburg, said in a note. “Should the dollar build a new bull phase, the ramifications for the rand and other emerging-market currencies remain dire.”
Foreign net purchases of South African bonds dwindled to 128 million rand ($10.4 million) in May, from 15.2 billion rand in April, according to Johannesburg Stock Exchange data. South Africa relies on portfolio inflows to bolster its current-account deficit, set to average 4.5 percent of gross domestic product in 2015, according to the median of 17 estimates in a Bloomberg survey.