JOHANNESBURG: The South African rand fell 1.4 percent to a fresh four-month low against the dollar on Monday on heavy selling triggered by fears that Greece might exit the euro, while the yield on the 14-year benchmark bond shot up ahead of auctions this week.

The rand is highly correlated to moves in the euro, as the euro region is South Africa's biggest trading partner and the euro hit a near four-month low against the dollar after coalition talks in Greece hit an impasse.

Uncertainty about whether Greece can form a government without having to hold new elections and growing concern it might eventually have to leave the euro zone spurred global risk aversion.

Analysts say the rand also tends to be first to react to risk sentiment amongst its emerging market peers.

The rand was down 0.8 percent at 8.1655 to the dollar at 1630 GMT, coming off the day's weakest level of 8.21, which it previously tested on Jan. 13.

Dealers said the currency, which closed in New York on Friday at 8.10, could weaken to 8.30 shortly if the risk-off mood continues for the next few sessions.

The government bond curve steepened as yields on the longer end of the curve shot up to one-month highs with investors concerned that there would be a lot of new stock in that area of the curve.

The yield on the 2026 bond was up 11 basis points at 8.43 percent, a level seen on April 16.

The bond will be on offer at the Treasury's weekly auction on Tuesday, where primary dealers are expected to take up 800 million rand ($97.82 million) of the 14-year issue.

 On Thursday the Treasury will offer investors the chance to swap a two-year bond yielding above 5 percent for the 14-year, yielding above 8 percent, plus two other bonds.

The expected supply is putting pressure on the 14-year bond and Tuesday's auction is expected to draw muted demand.

Dealers expect yields, although they look overstretched, to continue to head higher and are waiting for even lower prices before they buy.

"They are oversold. If you look at the longer end you start thinking maybe its value but you have to be brave to go out and buy it," said Vivienne Taberer, fixed income portfolio manager at Investec.

 "So I'm just sitting and watching although I think it looks attractive. Is it the right time to buy given what could happen over the next few weeks? I'm not sure."