EUR/ZAR Exchange Rate Falls as Hopes of Coronavirus Vaccine Boost Risky Assets
The Euro to South African Rand (EUR/ZAR) exchange rate plummeted by -1% today, with the pairing currently trading around R19.545.
The South African Rand (ZAR) has benefited from growing hopes of a Covid-19 vaccine breakthrough after China said it could have an actionable antidote to the virus as early as November.
Consequently this has boosted demand for risky assets like the South African currency.
Prof Peter Openshaw, who advises the British Government’s SAGE group, was also optimistic about a coronavirus vaccine in the near term, saying:
‘I do think that we will probably have positive results of at least one of these vaccine trials, probably more than that, by Christmas.
‘And that means that with rapid scaling up we might have vaccination programmes which can roll out to some parts of the world over the next nine months.
‘So before the winter of 2021/22, I hope that we should have vaccines which are effective.’
However, with South Africa’s economy likely to suffer a severe setback because of the coronavirus pandemic, the South African Rand’s (ZAR) gains are likely to be short-lived.
South African Finance Minister Tito Mboweni said that the economy is likely to contract by more than -7% than previously forecast.
Euro (EUR) Falls Despite Stronger-than-Expected Uptick in Eurozone Economic Sentiment
The Euro (EUR) failed to gain against the South African Rand (ZAR) today despite a stronger-than-expected uptick in the Eurozone’s ZEW Survey of Economic Sentiment for September. The gauge rose from 64 to 73.9.
Today also saw the release of Germany’s ZEW Survey of Economic Sentiment for September, which beat forecasts and rose from 71.5 to 77.4.
ZEW President Achim Wambach commented:
‘The ZEW Indicator has increased again, signalling that the experts continue to expect a noticeable recovery of the German economy. Stalled Brexit talks and rising COVID-19 cases could not dampen the positive mood.’
However, the single currency’s gains have been checked by growing concerns over a resurgence of the coronavirus in Europe.
This follows a stark warning from the World Health Organization (WHO) who sad that the situation will likely deteriorate through much of October and November.
EUR/ZAR Forecast: Euro to Rise on Creeping Return of Safe-Haven Demand
Euro (EUR) traders will be awaiting tomorrow’s release of the Eurozone’s Trade Balance report for July. Any improvement in the bloc’s exports would prove EUR-positive.
The risk-averse South African Rand (ZAR) will remain sensitive to coronavirus and global economic news. As a result, we could see the South African currency suffer on any signs of an increase in the number of Covid-19 cases.
The EUR/ZAR exchange rate could claw back some of its losses this week if the Covid-19 situation worsens. As a result, investors would seek out safe-haven currencies like the Euro.