Euro to South African Rand Exchange Rate Climbing Back from Weekly Lows as Risk-Rally Unwinds
Emerging market currencies like the South African Rand (ZAR) saw a brief surge in demand on Monday, but despite a lack of strong Eurozone data today the Euro to South African Rand (EUR/ZAR) exchange rate has rebounded slightly.
Broad fluctuations in the relatively risky Rand made it easier for EUR/ZAR to advance slightly from the interbank level of 16.31 to 16.38 last week, but the pair has already shed all those gains.
As Eurozone data has been mixed and Euro (EUR) investors remain uncertain about the direction of the Eurozone economy, EUR/ZAR has been largely driven by shifts in global market risk-sentiment so far this week.
However, weakness in Eurozone data has also meant that the Euro has been unable to rebound strongly from yesterday’s lows, despite the weaker South African Rand today.
Euro (EUR) Exchange Rates Rebound Limited amid Mixed Eurozone Confidence Data
Last week’s disappointing Eurozone manufacturing PMI stats from Markit continued to weigh on market demand for the Euro (EUR) when markets opened this week, making it easier for the South African Rand (ZAR) to push EUR/ZAR lower amid a brief risk-rally.
While yesterday’s German business confidence data from Ifo beat forecasts and hinted that things may still be improving for Eurozone economic activity, this was not enough to bolster Euro demand.
Today’s German consumer confidence and French business confidence data gave investors more reason to be uncertain about the Eurozone economic outlook, as the data fell short of expectations.
These combined with German 10-year bond yields, which remained near their worst levels, kept investors anxious about the global economic slowdown and limited the Euro’s recovery potential versus the Rand today.
South African Rand (ZAR) Exchange Rates Shed Some Early-Week Gains
At the beginning of the week, concerns about plunging bond yields in major economies like the US and Germany made investors concerned that major economies could be in for slower growth than expected – or possibly even recession.
Amid speculation that the US could see a recession, or that the Federal Reserve could cut US interest rates over the coming year, investors were briefly much more willing to take risks by buying currencies from emerging markets.
The South African Rand (ZAR) jumped at the beginning of the week on the risk-rally, despite a lack of notable domestic support.
This was also why the South African Rand failed to hold its ground today. Investors sold the Rand amid a lack of domestic support, as yesterday’s risk rally cooled and investors took profit.
Other factors making investors hesitant to take risks persisted, such as Brexit jitters and concerns about South Africa’s ongoing energy shortages. As a result, the South African Rand slipped today.
Euro to South African Rand (EUR/ZAR) Exchange Rate Investors Await South African Reserve Bank (SARB)
The Euro’s (EUR) recovery versus the South African Rand (ZAR) has been limited, but as risk-sentiment has cooled from Monday’s jitters the Euro to South African Rand exchange rate could be influenced more by data in the coming sessions.
Tomorrow will see the publication of some fairly notable Eurozone ecostats, including French consumer confidence, French PPI, and French jobseekers data as well as a speech from European Central Bank (ECB) President Mario Draghi.
However, Thursday’s session has even more potential to influence the Euro to South African Rand exchange rate.
March’s finalised overall Eurozone confidence stats will be published, and German inflation rate projections from March are due as well.
It will also be the most notable session of the week in terms of South African news, as South African PPI will be published and the South African Reserve Bank (SARB) will hold its March policy decision.
If the SARB takes a more optimistic tone on the South African economic outlook than expected, the Euro to South African Rand (EUR/ZAR) exchange rate may struggle to keep recovering and may even be in for further losses.