Johannesburg - The rand weakened against the US dollar early on Thursday as investors braced for official data expected to show falling output in the mining sector.
The anticipated fall in mining production in September, expected to be a 3.45 percent year-on-year decline, will be a smaller contraction than the previous month but still bad news for a sector impacting other parts of the economy.
The rand fell 0.3 percent to 11.2235 against the dollar at 09:02 SA time, off a 11.1930 close in New York on Wednesday.
Dealers said the underlying trend for the rand was weakness, with the currency dogged by ratings downgrades for South Africa, electricity supply fears and weak economic fundamentals.
Moody's cut South Africa's credit rating to Baa2 from Baa1 last week because of poor prospects for economic growth and rising public debt.
The agency followed up with ratings cuts on South Africa's banks and government entities.
State power utility Eskom, which provides almost all of South Africa's electricity, is operating on razor-thin margins and introduced rolling black-outs for the second time this year at the start of the month.
Government bonds weakened slightly but remained near the month's high as falling global oil prices improve the prospects of benign inflation and steady interest rates in South Africa.
“The R186 is again at its lows near 7.80 percent but will need the dollar/rand closer to 11.00 to break this level convincingly,” Deon Kohlmeyer, a bond trader for Rand Merchant Bank said in a market note.
The benchmark R186 nudged up one basis point to 7.86 percent on Thursday.
“With German 10-year bunds at 0.81 percent and even the Irish equivalent bonds at 1.60 percent, the R186 looks appealing close to 8 percent,” Kohlmeyer said. - Reuters