On Tuesday the Euro to South African Rand (EUR/ZAR) currency pair dropped from a high of 13.2236 to trade in the region of 13.1298.
The EUR/ZAR exchange rate had spent the previous five days fluctuating between 13.3597 and 13.1276 as uncertainty in Greece and mixed economic reports for the Eurozone took a toll on the Euro.
As the Eurozone is one of South Africa’s main trading partners, demand for the emerging-market Rand was also affected by the Greek negotiations. Geopolitical concerns, domestic power cut fears and commodity price movements had a further impact on the currency.
Although South African growth data exceeded expectations today, the Rand was initially trading in a softer position against several of its most-traded currency counterparts following its publication.
In the fourth quarter of 2014 the South African economy expanded by 4.1%, up from revised expansion of 2.1% in the previous quarter and better than the growth of 3.7% expected by economists.
Rand gains were limited though, as across 2014 as a whole the South African economy only expanded by 1.5% – significantly less than 2013’s growth of 2.2%.
As one industry expert stated; ‘Manufacturing, mining and agriculture picked up in the last quarter of 2014, but wholesale and retail [shrank]. This illustrates some economic sectors remain under strain. The overall slightly better growth picture does not detract from the growth risks, which remain quite bearish.’
However, the EUR/ZAR pairing did go on to slump by 0.3% as trading continued in spite of it being announced that the European Commission has accepted the economic measures proposed by Greece.
In a letter released on Tuesday it was asserted that, in the view of the European Commission, the list of reforms submitted by the Hellenic nation; ‘is sufficiently comprehensive to be a valid starting point for a successful conclusion of the review as called for by the Eurogroup at its last meeting. We are encouraged by the commitment to combat tax evasion and corruption.’
As the Eurogroup must still grant its approval of the measures, the Euro’s gains were minimal.
Other South African reports to be aware of this week include South Africa’s Producer Price Index (due out on Thursday) and the nation’s Trade Balance figures (scheduled for release on Friday).
Positive reports for South Africa could help the Rand extend gains against the Euro.
Over the rest of the week volatility in the EUR/ZAR pairing could also be caused by Germany’s employment figures, the Eurozone’s measures of Consumer, Industrial and Services Confidence and, finally, Germany’s Retail Sales and Inflation reports.
During the European session the Euro to South African Rand (EUR/ZAR) exchange rate was trading in the region of 13.1245