Over the past week, the Euro to South African Rand (EUR/ZAR) exchange rate was trending within the range of 13.9957 to 14.3506.
Since the People’s Bank of China (PBoC) opted to devalue the Yuan, most of the world’s currencies were affected. The Euro, however, has been one of the more resilient assets given that the slowdown in China has minimal impact on the European Central Bank (ECB) and its current policy outlook. Although growth in the Euro-area was less desirable-than-anticipated, last week saw progress made towards Greece receiving financial aid and the ECB was particularly positive with its outlook on Eurozone inflation. The potential delay China’s slowdown will cause Federal Reserve and Bank of England (BoE) rate hikes have also reduced the chance for sustained policy divergence between the three major central banks.
Conversely, the assets most affected by the PBoC belong to emerging market nations. The South African Rand plunged as dampened market sentiment saw increased demand for safe-haven assets. Even improvements with the nation’s leading energy provider Eskom, which saw load shedding reduced to a minimum, has not been enough to provoke positive changes for the Rand. Additional downward pressures can be attributed to bearish commodities as prices continue to fall. The threat of strike action in South Africa’s gold mining sector piled further pressure on the Rand and drove the currency to a 14-year low against the US Dollar and its worst ever rate against the Pound.
The Euro to South African Rand (EUR/ZAR) exchange rate is currently trending in the region of 14.3119.
The shared currency edged higher versus its South African counterpart during the early stages of Tuesday’s European session. The single currency uptrend can be linked to speculation that Euro-area nations will approve the terms for Greece’s third bailout package. Spain, Estonia and Austria all vote today. A complete absence of domestic data ought to see shared currency movement dominated by geopolitical developments.
Despite the fact that the PBoC kept the reference rate for the RMB flat this morning, the Rand continues to edge lower versus its currency rivals. This is partly due to trader uncertainty with regards to China’s central bank and the control they have on the market. Although the Yuan is stable for now, China’s economic progress remains subdued. Furthermore, the stock market in China fell by 6% as trade opened today. Eskom continues to show signs of improvement, but the Rand has been little affected with the backdrop of falling commodities, with particular reference to precious metals. Speculation that the soon to be published Federal Open Market Committee (FOMC) meeting minutes will be hawkish in tone has been another cause of Rand weakness.
The Euro to South African Rand (EUR/ZAR) exchange rate dropped to a low of 14.2540 during Tuesday’s European session.
Looking ahead, the European economic docket is particularly sparse over the coming week. Friday’s German Consumer Confidence and Eurozone Consumer Confidence reports have the greatest weighting in terms of provoking Euro changes. Single currency volatility will be subject to geopolitical developments.
Wednesday will be significant for those invested in the Rand. Inflation data and Retail Sales data have the potential to cause changes for the South African asset. The remainder of the week will see a complete absence of South African economic data publications, however, so Rand movement is likely to be the result of market sentiment.
The Euro to South African Rand (EUR/ZAR) exchange rate reached a high of 14.3373 during Tuesday’s European session.