January 13, 2012 / 4:53 PM / in 6 years

S.Africa's rand falls 2 pct after outlook downgrade

* Rand falls quickly after Fitch cuts outlook

* Bonds sell off following currency

JOHANNESBURG, Jan 13 (Reuters) - The rand tumbled 2 percent against the dollar late in Friday’s session as investors dumped the currency after Fitch downgraded South Africa’s rating outlook.

The rand had looked ready to firm through 8 rand to the dollar, a resistance level, before the announcement, but the combination of Fitch’s action and reports of possible downgrades to some European countries saw investors march out of risky positions before the weekend.

The rand weakened to its worst level in a week at 8.2249, retreating quickly from the session high of 8.0235 touched earlier.

Fitch cut South Africa’s rating outlook to negative, saying it had seen limited progress on several long-standing structural issues that have caused the economy to fall behind its peers.

South African shares also lost on the Fitch move, which is likely to see investors charge South Africa more to borrow.

Government bonds reacted to the negative mood with yields climbing 6.5 basis points to 6.795 percent on the 2015 issue and 3.5 basis points to 8.565 percent on the 2026 bond .

Reporting by Xola Potelwa

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