Over the past week or so, the single currency has gradually gained versus the South African Rand. The appreciation is mostly the result of US Dollar strength, although the Euro has managed to appreciate across the board since Greece deferred a payment due to the International Monetary Fund (IMF) and avoided a default. The Euro to South African Rand (EUR/ZAR) exchange rate was trending within the range of 13.5801 – 14.1534 over the last seven days.
After Greece announced it would be consolidating its outstanding payments to the IMF and making them at the end of the month, the Euro generally gained versus its major peers. Geopolitical tensions and uncertainty notwithstanding, many feel that the extra time afforded to the Hellenic nation will be enough for them to secure vital bailout funds from the troika of creditors. Thus far, however, the austerity measures the European Commission has proposed to Greece have been described as ‘ridiculous’ by Greek officials, who fear that they are a step too far for citizens with no money to cut.
The South African Rand, like many emerging-market assets, generally softened over the past week with the US Dollar holding a strong position. Falling oil prices, coupled with geopolitical unrest in Europe, has weighed heavily on demand for riskier assets. Although few in number, South African economic data publications printed relatively positively over the past week, although the Rand has seen little by way of an uptrend in response. The weight of continued issues with the nation’s leading energy provider, Eskom, has been a huge fiscal and economic drag. Perhaps the most significant headwind was caused by Fitch after affirming South Africa’s BBB rating, saying an inadequate and unstable electricity supply had led it to slash economic growth forecasts for this year and the next.
On Tuesday, the Euro to South African Rand (EUR/ZAR) exchange rate dived by around -0.70%.
In the early stages of Tuesday’s European session, the single currency advanced versus its major rivals. The appreciation was the result of Eurozone growth data meeting with median market estimates, and in response to Greece submitting yet another proposal for reforms in order to unlock aid. Euro gains were short-lived, however, after rumours surfaced that the supposedly fresh proposal submitted by Athens today is just simply a rehash of already rejected reforms. As the month progresses demand for the Euro is likely to slip as we draw closer to the large, bundled IMF repayment as a result of deferrals. Without unlocking vital funds, Greece will almost certainly default on the loan repayment.
The South African Rand, conversely, strengthened versus many of its closest competitors despite the US asset holding a position of strength. The Rand advance can be linked to a load-shedding free Tuesday after Eskom stated that there was enough spare capacity to avoid load-shedding today. This didn’t stop the flagging company issuing warnings about constraints on the grid during peak hours, and they advised citizens to find eco friendly ways to keep warm.
The Euro to South African Rand (EUR/ZAR) exchange rate was trending within the range of 13.9500 – 14.1547 during Tuesday’s European session.
Looking ahead there will be a distinct lack of influential data publications with the potential to provoke Euro movement over the coming week. It is likely, however, that the situation in Greece will dominate trader focus. Friday’s Industrial Production has the potential to spark single currency volatility.
For those invested in the South African asset, there will be plenty data publications to influence Rand changes over the coming week. Business Confidence, Mining Production and Manufacturing Production will all be of interest. Additionally, US Dollar movement is likely to have a significant impact on the Rand.