The South African Reserve Bank (SARB) raised its main lending rate by 50 basis points to 7.75% on Thursday, twice the 25 basis point increase that most economists had predicted, sending shares on the Johannesburg Stock Exchange lower.
The rate hike strengthened the rand, which in turn dragged down rand-hedged shares, said Wayne McCurrie, portfolio manager with FNB.
Rand-hedged shares earn a chunk of their profits from other currencies. They tend to lose value when the rand strengthens because it becomes more expensive for investors abroad to buy shares on the local bourse.
"The sharp strengthening of the rand is less favourable to exports which could be providing a bit of a negative headwind today," said Shaun Murison, senior market analyst at IG.
Both the blue-chip Top 40 index and the benchmark all-share index closed about 0.8% lower.
Markets were also dampened as the resources sector fell about 2% from its previous close.
The rand gained against the dollar to its strongest level in more than a month after the central bank's rate hike.
At 1524 GMT, the rand traded at 17.725 against the dollar, 0.49% stronger than its previous close.
The government's benchmark 2030 bond was stronger, with the yield down 7 basis points to 9.830%.
(Reporting by Tannur Anders and Nellie Peyton; Editing by Alexander Smith, Bhargav Acharya and Richard Chang)
