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Johannesburg - The rand gave up brief gains to trade weaker against the dollar on Thursday despite the SA Reserve Bank (Sarb) lifting interest rates, a decision viewed as a borderline call in an economy caught between the prospect of rising inflation and weak growth.
Sarb raised interest rates by 25 basis points to 6% and said it remained in a hiking cycle while upside risks to inflation remained in place.
At 17:00, the rand was trading 0.2% weaker at R12.4350 to the dollar compared to its closing level on Wednesday.
"We are still weak versus the dollar. Given the weak state of the economy, the currency is just pricing in those weaker growth conditions that are likely to be exacerbated by the rate hike, even though it was a small hike," said Ricardo da Camara of ETM Analytics.
The bank last raised benchmark lending rates in July 2014, but since then Africa's most advanced economy has been constrained by chronic power shortages along with other structural obstacles.
Analysts had been almost evenly split whether South Africa would raise interest rates or hold them.
"There was not a single positive in the central bank's speech today. This is a currency I didn't want at 5.75% and I don't want it at 6% and I wouldn't want it at 7%," a London-based currency trader said.
Government bonds gained, and the yield for the 2026 benchmark was down 0.5 basis points to 8.115%.
