Cape Town - The rand extended its post-rate hike rally on Friday, gaining another almost 1% against the greenback.
By 10:15 the rand was trading at R16.07/$ (+0.73%), from R16.05 earlier in the session and from Thursday's close of R16.19. The unit was trading at R16.33/$ when Reserve Bank governor Lesetja Kganyago was delivering the bank's Monetary Policy Committee's rates decision.
Adam Phillips, independent treasury specialist to corporates at Umkhulu Consulting, told Fin24 that, overall, the rand behaved "incredibly well" this week.
"For it to move below 16.00 could be a little bit difficult in the short term, but these are still very good levels for exporters," he said.
The rand has lost just over 4% of its value against the dollar this year, but the unit is a long way away from R17.9950 it reached on 11 January following the fallout of #Nenegate.
Phillips said in his morning note to clients: "I think that the Sarb has been brave in putting up rates by 50 basis points.
"Yes, consumers and anyone with some sort of debt is going to be unhappy, but in a year's time we might be thanking the Sarb. They have put a mark down and maintained their independence as an institution. I am sure the rating agencies will agree with what they did."
According to Phillips, Kganyago clearly pointed out that structural changes are needed and he emphasised that the fall in the currency was caused by internal matters, "in which he was clearly describing the sacking of (former finance minister Nhlanhla) Nene as being a reason for the ZAR weakness".
"It could well be that we still have some (more rate) increases to come, but I think they will be in 25 point moves. For me getting the pain out of the way quickly is a good recipe."
The rand and bonds clearly moved ahead on the back of the news. "Let's hope it is not a suckers rally like we saw back in November," said Phillips.
Wichard Cilliers, Director and Chief Dealer, TreasuryOne, said the move to hike rates shows that the MPC has some backbone.
The MPC announced on Thursday that it decided to hike interest rates by 50 basis points to 6.75%, taking the prime lending rate to 10.25%.
"The MPC also stated unequivocally that its focus is on inflation targeting, and they will not intervene in the currency markets. With inflation threatening to the topside of the band, expect the MPC to keep their stance of a tightening cycle, until such a time that inflation pressures have subsided," said Cilliers.
He said oil played a bigger role in the rand's pull-back as most market players thought the rates move was priced in.
"The rebound in the oil price was the catalyst for market players to become more 'risk-on' and the move was seen through all of the emerging markets. It seems that there is some momentum for the rand to continue its downward trend in the short term."
The South African trade number, out today, is also expected to impact the rand.
"Should the number come in as a trade surplus, expect the rand to continue its downward momentum."
Cilliers said a potential banana peel could be the release of the US GDP number later on Friday afternoon.
"Should the number come out better than the anticipated 0.8%, we could see a rally in the US dollar and rand weakening as we head into the weekend.
"Expect the rand to try and push for a break of R16.00 and around these levels should be a great buying opportunity."