On Tuesday morning, the rand hit a new record low against the dollar amid concerns about South Africa's relationship with Russia.

The rand reached R19.8391/$ in early trading. A year ago, it was trading below R15.30.

By mid-morning, the local currency regained some of its losses to trade around R19.80. It was last trading at R24.45 to the pound and R21.15 to the euro.

"South Africa’s decision to provide diplomatic immunity to Russian President Vladimir Putin at the BRICS summit in August has unnerved traders," says Gryphon Asset Management research analyst and portfolio manager Casparus Treurnicht.

On Monday, government said it would provide diplomatic immunity to attendees of an upcoming BRICS ministerial meeting in Cape Town this week and the summit in Johannesburg later this year.

This comes as government navigates its legal options should Putin visit the country in August, after the International Criminal Court (ICC) issued a warrant of arrest for him. The ICC issued the warrant against Putin for war crimes related to the alleged abduction of children from Ukraine. South Africa is a signatory to the Rome Statute of the ICC and is obliged to act on the arrest order.

But government insists that the declaration of immunity was "routine" and had nothing to do with Putin.

Along with the diplomatic immunity announcement, the SA Reserve Bank's warning about the potential threat of sanctions also hit the market, Treurnicht added.

On Monday, the bank warned that sanctions are a risk due to South Africa's stance on Russia’s invasion of Ukraine. In its latest financial stability review, it warned the sanctions may hold dire consequences for South Africa’s financial system.

Nolan Wapenaar, co-chief investment officer of Anchor Capital, says these concerns added pressure on the rand.

Wapenaar told News24, "Putin is like a recent bruise for the economy. Every time you rub a bruise, it hurts just a little bit more. That is clearly a part of the rand’s woes."

Wapenaar noted that the dollar was also slightly firmer on Tuesday morning against other currencies. "The pain is both self-inflicted and external this morning."

Expectations of another round of rate hikes by the Fed have raised demand for the dollar, said Bianca Botes, director at Citadel Global.