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The rand hit a new record low on Thursday afternoon after the monetary policy committee signalled that it may have reached the end of its hiking cycle.
By Thursday evening, the local currency had weakened still further and was trading at R19.7829/$ – its worst level ever. Less than a year ago, it was trading below R15.30.
The rand was also trading at R24.20 to the pound and R21.01 to the euro.
The repo rate hike of 50 basis points to 8.25% was largely expected.
But Reserve Bank Governor Lesetja Kganyago also sounded less hawkish on further hikes at a media briefing on Thursday, which may have triggered the rand slump.
He said that the bank had been saying for some time that it was tightening monetary policy but that it had not yet reached "restrictive territory".
"Now, we have just reached restrictive territory. We have got to see the effects of this policy stance and what it means.
"Given upside inflation risks, larger domestic and external financing needs, and load shedding, further currency weakness appears likely," Kganyago added.
"We have moved into restrictive interest rate territory with anaemic growth and inflation that is on a slow glide path back toward the mid of the band [4.5%]," says Nolan Wapenaar, co-chief investment officer at Anchor Capital.
"The statement seemed less hawkish than the market was expecting as we have not yet reached the end of the global hiking cycle.
"The statement from the SARB that further rand pain might be experienced also was immensely negative for the currency outlook," Wapenaar added.
Investors are used to South Africa offering much higher interest rates than developed markets like the US, which has made rand investments attractive.
But following aggressive US rate hikes, that differential has now shrunk. The US has hiked by a huge 500 basis points to date in its current cycle, and even after the last hike, South Africa is only at 475bp.
The rand weakness will add to hot inflation in South Africa, as the country imports most of its fuel, and key crops like maize and wheat are priced according to import and export parity (in dollar).
Aggressive interest rate hikes have added to the strain on the South African economy, which may already be in a recession due also to load shedding. That, along with cooling inflation – April's consumer and producer inflation data came in lower than expected – may dissuade the Reserve Bank from more hikes.
* This article was edited at 20:45pm on Thursday to reflect the updated exchange rate.