The rand currency fell sharply after more than a week of attacks on African migrant workers, accused by many poor township dwellers of stealing jobs and fuelling a wave of violent crime.

Local media said two people were killed overnight in the Ramaphosa squatter settlement east of Johannesburg.

Police fired volleys of rubber bullets to disperse about 700 people who earlier forced foreigners from the area, Reuters TV cameraman John Mkhize said. At least two people were injured.

Thousands of foreigners, mostly from Zimbabwe, Mozambique and Malawi, have fled into refugee shelters since the violence began on May 11 in Alexandra township.

Several foreigners have been burned to death, women raped and scores of shops and homes looted. More than 200 people have been arrested.

Criminal gangs are believed to be involved in the attacks.

The violence helped weaken South Africa's rand as investors backed away from the currency, fearing the xenophobic attacks could hurt the economy. The rand was pushed down further after Asian and European stocks weakened.

"We've got the domestic xenophobic violence which is scaring investors away, so these factors are combining to create a weaker rand," said David Gracey, a trader at Nedbank.

The currency fell over 1.7 percent to 7.68 to the dollar.

South Africa's tourism minister said the violence could hurt the sector, which contributes around 8 percent of Gross Domestic Product to Africa's biggest economy, employs a million people and attracted 8.4 million visitors last year.

"Africans increasingly travel to South Africa as a holiday destination and these attacks have the potential to certainly impact negatively on that market if this is what people see on their screens and hear on their radios," Marthinus van Schalkwyk told reporters.

GREAT HARM

South Africa's deputy foreign minister said the violence was damaging the country's good name.

"It is causing great harm to South Africa's reputation and it can only be bad for our democracy", Aziz Pahad told reporters in Pretoria.

The ruling African National Congress said the situation was coming under control after it sent officials into townships to appeal for an end to the attacks.

Police also increased their deployment to trouble spots.

"We are going hard on the situation," said Safety and Security Minister Charles Nqakula

The unrest threatens to increase political instability at a time of electricity shortages, rising inflation and disaffection among the poor over President Thabo Mbeki's pro-business policies.

Mbeki has faced strong criticism, especially from ANC left wingers, for not spreading the benefits of black rule to millions of poor people.

South Africa, with a population of 50 million, is home to an estimated 5 million immigrants. Foreigners have been lured from poorer neighbours by work in mines, farms and homes and by one of the world's most liberal immigration and refugee policies.

The biggest group -- an estimated 3 million -- are from Zimbabwe. They have fled economic collapse at home and the violent political standoff since disputed March 29 elections.

Mbeki's critics say his softly, softly approach has done too little to end the crisis or stem the flow of migrants.

Mbeki and ANC leader Jacob Zuma have called for an end to the attacks, which have dented South Africa's reputation for tolerance and threaten its hopes of attracting an estimated half million foreign visitors to the 2010 soccer World Cup.

"There is no room for xenophobia in South Africa. The violence perpetrated against foreign nationals is nothing but thuggery and criminality. The police must deal with this matter speedily to identify and arrest the perpetrators," Zuma said in a statement on Tuesday.