Finance minister stand-off rattles rand

South Africa's rand fell against the dollar on Wednesday as investors fretted over a stand-off between an elite police unit and Finance Minister Pravin Gordhan.

A public spat between Gordhan and the Hawks police unit has triggered uncertainty and raised concerns of a repeat of the run on the rand and bonds in December when President Jacob Zuma inexplicably fired Gordhan's predecessor.

At 0700 GMT the rand was down 0.16 percent at 15.9550 to the dollar compared with its close in New York.

The currency slid as much as 3 percent on Tuesday after the Hawks threatened to exercise "constitutional powers" after Gordhan missed a second deadline to answer questions about a suspected spy unit established while he was head of the South African Revenue Service.

"While the current political wrangling continues to dominate headlines, uncertainty regarding the rand will remain entrenched," Nedbank said in a market note.

This week's sharp fall in the rand will make it harder for the central bank to decide its next move on interest rates on Thursday, as it weighs concerns about waning economic growth against those on rising inflation pressures.

Government bonds recouped some of the previous day's heavy losses, which pushed the yield on benchmark 2026 paper to a two week high of 9.45 percent. In early Wednesday trade, the yield retreated 3 basis points to 9.42 percent.

Stocks opened flat, with the JSE securities exchange's Top-40 index easing 0.13 percent.

Investors are also worried about a possible downgrade from Moody's which said last week it would put South Africa's Baa2 rating on review for a cut. The agency was due to start an assessment visit on Wednesday.