The past week has seen the Euro to South African Rand (EUR/ZAR) exchange rate climb from a low of 13.9311 to a high of 14.0155, although the currency has continued to fluctuate wildly in response to the ongoing negotiations in Greece.
Last week, the common currency experienced extreme instability in response to encouraging news and equally discouraging events in Athens. One of the largest blows to the Euro’s value came on Monday with the revelation that (while in office) former Greek Finance Minister Yanis Varoufakis had created an elaborate ‘Plan B’ to convert the Greek currency back to the Drachma if the country seemed set to lose possession of the Euro.
The Euro fared better after rumours came that Greek stock markets would reopen as early as July 28
th
; this date proved to be erroneous, but the news gave the Euro some much needed respite against its competitors and saw it climb by over 1% against the South African Rand, as well as other currencies.
The Euro dipped on Wednesday after Greek Prime Minister Alexis Tsipras announced that he might hold a snap election in order to remove objectors to the bailout from his party, a declaration that saw the Euro trend narrowly against the US Dollar, the Australian Dollar and the Canadian Dollar. However, the Euro maintained its advantage the South African Rand, seeing a 1% gain.
In the latest of many seesawing movements for the Euro, the common currency then experienced a sudden uptrend on Friday after the yearly core Eurozone Consumer Price Index (CPI) for July showed a 0.2% increase from June, which brought Eurozone inflation up to 1%. The European Central Bank (ECB) aims for a rate ‘below, but close to, 2%’, so the increase could only be seen as beneficial for the overall Eurozone economy. After the figure was released, the Euro gained against the South African Rand and the Australian Dollar by over 0.8%.
This week, Euro exchange rate movement may occur as a result of Eurozone June Retail Sales and Factory Orders, PMIs and Trade Balance figures from Germany. Forecasts for these results have been mostly optimistic, but any major setbacks or upsets in Greece may diminish the effect of any positive results. The Euro to South African Rand exchange rate is still likely to increase, however, due to a number of factors affecting the Rand.
A US interest rate increase seems likely before the end of the year and any US reports which increase the likelihood of this occurring will negatively impact the Rand this week. The July US Non-Farm Payrolls and Unemployment Rate results are both released on Friday, and any beneficial results increase the possibility of an interest rate hike occurring.
The Rand is also affected by (the lack of) import demand from China. China was previously a major importer of South African mining products, but it has been estimated that China’s gold importing may fall by as much as 40% this year. The Chinese economy has also seen clear evidence of contraction lately, and these factors have further weakened the Rand against the Euro. The July Balance of Trade for China is due on Saturday, and any signs of import growth easing would further strengthen the Euro against the Rand.