The rand fell as low as 14.1600 against the dollar, its weakest since May 17, before paring losses to trade roughly 0.5% weaker at 14.1050 by 1553 GMT.
The Fed's signal on Wednesday that U.S. rates could rise sooner than previously expected dented appetite for emerging market currencies like the rand because it lessened their appeal for carry trade, where investors borrow cheaply in one currency and buy assets where returns are higher.
Along with favourable commodity prices, carry trade has helped make the rand the best-performing emerging market currency in 2021, despite the weak state of the local economy.
Data on Thursday showed retail sales fell 0.8% in month-on-month terms in April, their fourth monthly decline in five months which suggests poor consumer demand.
Shares on the Johannesburg Stock Exchange (JSE) were hit as investors worried a more hawkish Fed would restrict fund flows into emerging market equities.
"Clearly the Fed is more worried about inflation than two months ago. And we are still going to get high inflation numbers out of the U.S. for at least another three or four months," said Wayne McCurrie, portfolio manager at FNB.
The JSE's benchmark All-share index lost 1.08% to end the day at 66,585 points, bringing it back to levels seen on May 27. The blue-chip index of top 40 companies also fell 1.08% to 60,400 points.
Among the day's biggest losers were bank and mining stocks. The banking index lost 3.14% while the resources index was down 3.33% as gold and platinum prices fell.
(Reporting by Alexander Winning and Promit Mukherjee; editing by Jonathan Oatis)
