The South African internal market is reeling at the unexpected decision by the SA central bank to cut interest rates, and the rand has suffered extended losses today (Friday) as a consequence.
The central bank's cut in the key repo interest rate, by half a percentage point to 7.50 per cent, is being widely reported as forced upon it by political pressure.
The rand depreciated by 5.4 per cent against the dollar in 24 hours, touching 6.55 to the dollar, 13 cents weaker than Thursday's close, and its lowest since 10 June.
At the South African Reserve Bank's last policy meeting in June, governor Tito Mboweni had said no-one should expect any more interest rate cuts.
"It would appear that the pressure that was brought to bear on the MPC (monetary policy committee) following the march of labour union members on Wednesday, played a significant role in the decision," said Absa chief economist Christo Luus in a research note.
"The rand did lose more than 20 cents against the dollar on the news, but it remains to be seen whether this decline will be sustained."
The devaluation, however, will be welcomed by exporters that have been suffering from what many see as an unrealistic position of strength for the rand in the last few months.
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