Euro to South African Rand (EUR/ZAR) Exchange Rate Slips after Massive US Stimulus Package

Euro to South African Rand Exchange Rate Slides amid Market’s Risk-Rebound 

The Euro (EUR) has seen resilient strength against the South African Rand (ZAR) lately, but the Euro to South African Rand (EUR/ZAR) exchange rate is sliding this week. The South African Rand is benefitting from market risk-sentiment. 

After opening this week at the interbank level of 18.91, EUR/ZAR briefly advanced further. EUR/ZAR touched on a high of 19.20 yesterday. This was the best level for the pair since its spike at the beginning of the week and one of the pair’s best levels in over a year. 

However, since hitting that high EUR/ZAR has been sliding again. At the time of writing on Wednesday, EUR/ZAR is trending below the week’s opening levels at the interbank level of 18.87. 

Still, a Euro supported by fiscal policy news is limiting the pair’s losses. On top of this, a looming lockdown in South Africa is limiting the Rand’s strength. 

Euro (EUR) Exchange Rates Slide as Safe Haven Demand Softens and Markets Calm 

For much of the past few weeks, the Euro (EUR) has been benefitting from safe haven demand. This is due to the Euro’s popularity as a funding currency. It has also benefitted from occasional weakness in its rival the US Dollar (USD). 

However, signs of calm in markets today is leading investors away from safe currencies and back into riskier ones. 

Massive stimulus packages from the Federal Reserve and US Congress have bolstered market sentiment this week. The stimulus is intended to help the US economy and markets to weather the coronavirus pandemic. 

As a result, markets have calmed slightly from weeks of panic. This has made investors more willing to take risks again. The Euro has been falling slightly against more risk-correlated currencies today as a result. 

Still, the Euro’s losses were limited. The shared currency remains appealing as a relatively reliable currency to buy. On top of this, signs of ramping up fiscal stimulus measures from EU nations are supporting the shared currency. 

South African Rand (ZAR) Exchange Rates Benefit from Stimulus despite Lockdown Jitters 

The South African Rand (ZAR) is a currency often correlated to emerging market and risk-sentiments. As a result, it has been a currency hit hard by the coronavirus pandemic. 

However, since yesterday the Rand has finally seen something of a rebound from its worst levels. 

Huge US stimulus measures from the Federal Reserve and US Congress have bolstered market hopes that economies will weather the pandemic. This has led to some limited calm in markets today, and higher demand for slightly riskier assets. 

On top of this, the Rand is benefitting from the latest stimulus from the South African Reserve Bank (SARB). SARB launched a bond-buying quantitative easing (QE) programme, bringing it more in line with other major central banks. 

There have been calls for the bank to make moves like this for some time. This is keeping the Rand fairly appealing today, even as South Africa is set to begin a 3-week lockdown from Thursday. 

Euro to South African Rand (EUR/ZAR) Exchange Rate Awaiting Coronavirus Developments 

Unless South Africa sees ramped up fiscal stimulus or global risk-sentiment remains a little more buoyant, the South African Rand’s (ZAR) current strength could be limited. 

Concerns over the coronavirus pandemic will continue to weigh on currencies correlated to risk like the Rand. Currencies perceived as safer like the Euro (EUR) will remain comparatively appealing. 

On top of this, if EU nations continue to ramp up their own stimulus measures this is only likely to further boost Euro support. 

What’s more, the South African Rand could see deeper pressure in the coming days as anxiety rises about South Africa’s upcoming lockdown. 

Overall, the Euro to South African Rand (EUR/ZAR) exchange rate’s potential for further losses is limited as the coronavirus pandemic will keep riskier currencies from strengthening too much. 

Josh Jeffery

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