Late afternoon weakness in the euro extended the local unit's losses to over 1 percent against the dollar.

At 1623 GMT the rand was down 0.9 percent at 8.4895/dollar compared to it previous close, recovering slightly from a session low of 8.4961 hit as the euro fell against the dollar.

The rand bears quickly fell through its 8.45/46 support area earlier in the session, weakening more than its emerging market peers as festering domestic labour strife knocked investors' confidence in South Africa.

Emerging market currencies were weaker on Thursday and the rand took the second worst spot after the Russian rouble in a basket of emerging market currencies traded against the dollar and tracked by Reuters.

"We think that a combination of profit taking on the back of the recent rally and the domestic developments in South Africa have been a source of rand weakness," said Roderick Ngotho, emerging market forex strategist at The Royal Bank of Scotland.

Africa's largest economy and the world's biggest platinum producer has been hit by violent labour clashes that left 44 people dead at a Lonmin mine in Marikana and froze production for the past two weeks.

"The domestic developments to do with Marikana and the view in the market that the president's hold on the ANC could be weakened by the Marikana issue is a negative dynamic for the rand," Ngotho said.

If it falls through support at 8.50, the rand will look to test 8.55, which could be triggered by developments at Jackson Hole when the Federal Reserve Chairman Ben Bernanke speaks there tomorrow.

Bonds bucked the weaker domestic trend and tracked US Treasuries as New York came into the market in late afternoon Johannesburg trade.

"Given the timing of the buying it feels like New York are coming in and buying bonds again. It's been very quiet the whole day and yields were just pulled down in the last 3 hours or so in very thin trade," said a Johannesburg-based bond trader.

The 14-year benchmark bond rallied to a two-week high with the yield at 7.425 percent, while the three-year yield dropped to 5.44 percent.

"We're following Treasuries. The rand is weaker and the budget numbers weren't that great. I'm hearing there were one or two foreigners. But it's a very thin day," said Malcolm Charles, fixed income portfolio manager for Investec.

The government reported a 87 billion rand ($10 billion) budget shortfall for the first four months of the fiscal year, compared to 81 billion rand in the same period last year, as expenditure overwhelmed revenue so far.