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Johannesburg - The under pressure rand has not had any relief by the announcement by the South African Reserve Bank (Sarb) that the repo rate is to increase by 50 basis points.
Instead the SA currency shed 2%, dropping to R11.2500/$ and getting closer to a five-year low hit last week.
The Sarb raised the repo rate, at which the central bank lends to commercial banks, to 5.5% from four-decade lows of 5.0%, the first rate rise in nearly six years.
This was keeping in step with attempts by Turkey and other emerging market economies to shore up their currencies.
Reuters reported analysts saying that the hike highlights the depth of concern over the emerging market rout as a result of the US Federal Reserve's decision to taper quantitative easing, and the subsequent inflation risks posed by the severe depreciation in the rand.
Analysts told the news agency that the decision is possibly the best outcome as it is bound to provide room for a much needed recovery in the rand, adding that more rate hikes cannot be ruled out.
South African Forward Rate Agreements (FRAs) due in 12 months jumped to nearly 7% on Wednesday, suggesting rates could go up by as much as 200 basis points this year.
"Exchange rate pressures are expected to intensify as markets adjust to the new pattern of global capital flows," governor Gill Marcus told a news conference.
"The primary responsibility of the bank is to keep inflation under control and ensure that inflation expectations remain well anchored."
Marcus said the rate decision had not been influenced by Turkey's surprise huge rate hike on Tuesday and was not aimed at affecting the exchange rate.
However, it came as the rand headed towards five-year lows during an emerging market sell-off that began last week.
Emerging market assets are being hit by concerns about reduced US monetary stimulus, large current account deficits - a problem for South Africa - and in the case of Turkey, domestic political concerns.
Instead the SA currency shed 2%, dropping to R11.2500/$ and getting closer to a five-year low hit last week.
The Sarb raised the repo rate, at which the central bank lends to commercial banks, to 5.5% from four-decade lows of 5.0%, the first rate rise in nearly six years.
This was keeping in step with attempts by Turkey and other emerging market economies to shore up their currencies.
Reuters reported analysts saying that the hike highlights the depth of concern over the emerging market rout as a result of the US Federal Reserve's decision to taper quantitative easing, and the subsequent inflation risks posed by the severe depreciation in the rand.
Analysts told the news agency that the decision is possibly the best outcome as it is bound to provide room for a much needed recovery in the rand, adding that more rate hikes cannot be ruled out.
South African Forward Rate Agreements (FRAs) due in 12 months jumped to nearly 7% on Wednesday, suggesting rates could go up by as much as 200 basis points this year.
"Exchange rate pressures are expected to intensify as markets adjust to the new pattern of global capital flows," governor Gill Marcus told a news conference.
"The primary responsibility of the bank is to keep inflation under control and ensure that inflation expectations remain well anchored."
Marcus said the rate decision had not been influenced by Turkey's surprise huge rate hike on Tuesday and was not aimed at affecting the exchange rate.
However, it came as the rand headed towards five-year lows during an emerging market sell-off that began last week.
Emerging market assets are being hit by concerns about reduced US monetary stimulus, large current account deficits - a problem for South Africa - and in the case of Turkey, domestic political concerns.
