Over the past week, the Euro to South African Rand exchange rate has fluctuated significantly. A general EUR/ZAR uptrend can be linked to US Dollar strength and cool demand for emerging-market currencies.
The shared currency has seen a great deal of volatility over the past week due to developments in Greece, but the Greek austerity referendum, in which citizens voted overwhelmingly in favour of rejecting amplified austerity measures, helped the Euro to stabilise somewhat. This was due to the fact that the ‘No’ vote comes with many unknowns and investors tend to hedge their bets in an environment of uncertainty. Traders are unsure about whether Greece will remain part of the Eurozone, whether the contagion from a Grexit could be limited and whether Athens will choose to bed with Russia in the face of a failure to secure aid from Europe.
The South African Rand, meanwhile, has been on a general downtrend over the past five days. This is largely the result of damp market sentiment and a lack of demand for emerging-market currencies amid tensions in Greece. China’s stock market issues have also weighed on trader risk-appetite. Furthermore, the Rand has also struggled in the face of ongoing difficulties with Eskom as rolling blackout continue to plague economic growth.
The Euro to South African Rand (EUR/ZAR) exchange rate is currently trending in the region of 13.8053.
On Wednesday, the Euro rallied against the Rand after Greece were given until Thursday to submit reforms and until Sunday to reach an agreement to unlock aid. The delay to the deadlines has stoked optimism that Greece will be able to secure an 11
th
-hour deal and avoid a Grexit and complete financial collapse. However, it is fair to say that Greece will be in potentially irreversible turmoil on Sunday if it fails to make good during negotiations. Not only will a forced Grexit be likely, but also the European Central Bank (ECB) could withdraw Emergency Liquidity Assistance (ELA). ELA is currently the only thing preventing a complete banking collapse and insolvency.
The South African Rand dived versus the shared currency on Wednesday as Greek geopolitics and China’s stock market issues continue to weigh on trader risk-appetite. In addition, South Africa’s leading energy provider Eskom continues to struggle against failing and dated equipment and rising demand. Having failed to gain approval for hiking rates, load-shedding and rolling blackouts are continuing to cause significant damage to South Africa’s economic growth. Today Eskom announced the possibility of load-shedding during peak hours.
The Euro to South African Rand (EUR/ZAR) exchange rate rallied by around 0.78% on Wednesday.
Looking ahead, domestic data is unlikely to be particularly impactful over the coming week with European geopolitics dominating trader focus. Developments with China’s stock market are also likely to continue to impact currency trading. With that being said, Thursday’s South African Manufacturing Production data has the potential to drive Rand changes.
The Euro to South African Rand (EUR/ZAR) exchange rate was trending within the range of 13.6596 to 13.8769 during Wednesday’s European session.