The decline sent the rand to the weakest level against the dollar since July 1. The South African Reserve Bank will probably hold the key rate at a five-year high of 12 percent, according to the median of 26 economists surveyed by Bloomberg. Rebounds by gold and platinum, South Africa's biggest exports, weren't enough to prevent the currency from losing earlier gains.

``The rand's a volatile currency so traders would rather take short rand positions ahead of the interest-rate decision,'' said Chris du Bois, chief dealer in Cape Town at Master Currency, which runs a chain of money changers. ``It will trade in a range with a slight negative bias until the outcome of the monetary policy decision tomorrow.'' A short position is a bet an asset will drop.

The rand fell as much as 1.1 percent to 7.9063 per dollar and traded at 7.8879 as of 4:39 p.m. in Johannesburg, from 7.8174 yesterday. Earlier it rose 0.4 percent. Against the euro, the currency dropped 0.7 percent to 11.7361, from 11.6539.

``Investors are taking risk off the table ahead of the interest-rate decision tomorrow,'' said Ulrich Leuchtmann, an emerging-markets currency strategist in Frankfurt at Commerzbank AG, Germany's second-biggest lender. ``There's a real fear that the rand could weaken in the short term if the central bank leaves rates unchanged.''

Retail Sales

A government report showed retail sales slid in June for a fourth consecutive month. Sales dropped 2.6 percent from a year earlier after declining a revised 3.4 percent in May, the Pretoria-based statistics office said.

``We're seeing a clear slowdown in the economy,'' said Monale Ratsoma, a macro strategist in Johannesburg at Absa Capital Research, which is owned by Barclays Plc. ``Higher borrowing costs are hurting consumers.''

The Reserve Bank, led by Governor Tito Mboweni, has raised its benchmark interest rate by three percentage points since June 2007, trimming consumer spending in the continent's biggest economy. Car sales sank an annual 20 percent in July after sliding 21 percent the previous month, an industry body said Aug. 4.

Gold and platinum rebounded from their lowest levels this year. Gold climbed as much as 1.7 percent to $826.15 an ounce, and platinum rose 2.8 percent to $1,519 an ounce. South Africa produces almost 80 percent of the world's platinum and about 10 percent of its gold, meaning the rand often moves in tandem with the metals' prices.

Rand Rally

The rand posted a seven-week rally after the last monetary policy committee meeting on June 12 when the central bank lifted interest rates by a half point, increasing the currency's allure for so-called carry trades.

In carry-trades, investors borrow money in countries with low interest rates to invest in markets that offer higher returns, earning the spread between the two. They take the risk currency moves will erase their profit.

South Africa's main interest rate compares with 0.5 percent in Japan and Switzerland's 2.75 percent.

The rand had its biggest weekly drop versus the dollar in more than two years last week as weaker precious metals prices damped the outlook for export revenue. The rand weakened more than 13 percent against the dollar in 2008, making it the worst performer of the 16 major currencies monitored by Bloomberg.

Government bonds slipped, with the yield on South Africa's benchmark 13.5 percent security due September 2015 rising 2 basis points to 9.30 percent. The yield on the 13 percent note due August 2010 jumped 6 basis points to 9.99 percent. Yields move inversely to bond prices