Although the Euro posted notable declines against several of its most-traded currency counterparts on Wednesday, the common currency advanced on a broadly softer South African Rand.
The Euro to South African Rand (EUR/ZAR) exchange rate achieved a high of 13.3160 during the local session as a number of factors pressured the emerging-market Rand lower.
Over the past five days, the EUR/ZAR pairing has steadily advanced, moving from a low of 12.9300 to a high of 13.4200 as concerns relating to South Africa’s energy supply took a heavy toll.
On Wednesday these fears were magnified as the nation’s electricity utility (Eskom Holdings SOC Ltd) asserted that there is a good chance that it will begin doubling the size of power cuts. South Africa has now been suffering from power outages for nine days. If the situation continues, it could have a devastating effect on the country’s economic performance.
The Rand has also been feeling the heat as the negotiations between Greece and its creditors intensify.
Today Greek Finance Minister Yanis Varoufakis will join a gathering of his European counterparts for the first time since his appointment in January.
Varoufakis will be attempting to persuade EU Ministers to agree with his proposed plans to restructure Greek debt, but if Tuesday’s meeting between PM Alexis Tsipras and Germany’s FM Wolfgang Schaeuble was any indication, he’ll have his work cut out for him.
Tsipras outlined a plan which would see Greece adhere to 70% of its bailout programme, but swap 30% for ten new reforms. Schaeuble was utterly unimpressed by the plan and poured icy water over any hopes of an agreement on the subject being reached swiftly.
The Rand also bombed against the Pound on Wednesday, with the Pound Sterling to South African Rand (GBP/ZAR) exchange rate surging by 1.4% to trade in the region of 18.0660.
While the prospect of a Grexit is Euro-negative, South Africa has strong trade links with the Eurozone so it also drags the Rand lower. If today’s talks end badly, the EUR/ZAR exchange rate could post further gains.
Additionally, the appeal of the South African currency fell as economists predicted that tomorrow’s report will show a 1.8% annual contraction in domestic mining production.
While the focus will be on Greece in the days ahead, the Eurozone’s upcoming industrial production and growth reports may influence the direction taken by the Euro to South African Rand pairing before the weekend.
The Euro to South African Rand (EUR/ZAR) exchange rate was trading in the region of 13.2762.