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The rand briefly hit its best level since February this year, as traders bet on the Federal Reserve's latest interest-rate hike being its last.
The Fed, as expected, raised borrowing costs once more on Wednesday, as it seeks to bring inflation down further, while analysts are forecasting it will pause going forward.
Bets that the Fed will not hike any further weighed on the dollar. On Thursday afternoon, the rand was trading at R17.59/$ after reaching R17.4355/$ earlier in the day - its strongest level since the start of February. Earlier in July, it was trading above R19.14/$.
The central bank's ninth straight increase took the closely watched deposit rate to 3.75% a level last seen in May 2001 and equal to its previous record high.
After Wednesday's keenly awaited meeting, bank boss Jerome Powell left the door open for another increase in September but added that any decision would be data-dependent.
"Policy has not been restrictive enough for long enough to have its full desired effects," he told reporters after the decision.
"So we intend, again, to keep policy restrictive until we're confident that inflation is coming down sustainably toward our two percent target - and we're prepared to further tighten if that is appropriate."
But he added that officials would "be going meeting by meeting".
In its official statement, the Fed said it would "continue to assess additional information and its implications for monetary policy", looking at a range of data points.
Analysts said that with a healthy run of indicators in recent months, there was hope that more than a year of tightening may have finally come to an end.
Powell also said he was optimistic that the world's top economy could dodge a recession, a situation many had bet on earlier in the year.
"The staff now has a noticeable slowdown in growth starting later this year in the forecast, but given the resilience of the economy recently, they are no longer forecasting a recession," he added.
Analysts said the meeting did all it needed to do by maintaining a hawkish tilt even as most observers think the hiking campaign is essentially over.
The latest hike comes after the bank stood pat on rates last month, but Kerry Craig at JP Morgan Asset Management pointed out that several members of the policy board at that meeting foresaw two more hikes in 2023.
"Given this, there would have been little benefit for the Fed conveying anything other than a hawkish lean and commitment to getting inflation back to target in their commentary," he added.
"By reiterating data dependency ahead of future measures, the Fed wants to increase its optionality as it has the chance to digest two more inflation and jobs reports before the next meeting."
In the later afternoon on Thursday, the dollar regained some losses after data showed that the US economy grew faster than expected in the second quarter and new orders for key US-manufactured capital goods unexpectedly rose in June.
The European Central Bank on Thursday raised interest rates a quarter point, lifting a benchmark rate to its highest level since early 2001 as its battle against surging inflation reached the one-year mark.
Additional reporting by News24 and Reuters.
