On November 22, the South African Reserve bank made an unexpected decision and raised its interest rate to 6.75% for the first time in almost three years. The decision was welcomed not by everyone, as the country’s economic growth came to the near-recessionary stage.
Analysts think the rate hike was a protective move towards the currency. The risks come from the domestic policy, the Federal Reserve, the possible cut of oil production by OPEC+ and the risk-off sentiment among the investors.
However, this kind of rate hike carries risks for the financial market. The higher interest rate will impact the economic growth of the country, which, therefore, may increase the risks of further downgrades in the credit rating of South Africa.
On the daily chart, rate hike indeed supported the ZAR, as the pair fell below the 13.8 level last week. The next support lies close to the 200-day MA at 13.4226. If the South African rand gains strength, the pair will break this level and move towards the next support at 13.4226. If the USD is supported, the pair will rise towards the resistance at 13.8171. The next resistance for the pair is placed at 14.0349.
This article was originally posted on FX Empire
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