The Euro to South African Rand (EUR/ZAR) exchange rate rallied by around 0.91% on Monday afternoon.
The strained relationship between Greece and Eurozone officials is being stretched further as the Eurogroup openly complained about Athens’ lack of detail when presenting reforms after the new Greek government demanded money before sufficiently satisfying creditors. With the potential for a forced Greek exit from the Eurozone gathering momentum, the shared currency declined versus many of its major peers.
The South African Rand, meanwhile, dived versus the majority of its most traded currency rivals. This was initiated by a lack of demand for emerging-market assets with market sentiment dampened amid geopolitics in Europe. The stronger US Dollar also saw the Rand trending lower. Lubricating the South African assets slide was news from Eskom, the leading energy provider in South Africa, that further load shedding will occur in order to safeguard the increasingly sensitive power grid.
The Euro to South African Rand (EUR/ZAR) exchange rate is currently trending in the region of 12.8287.
Euro (EUR) Exchange Rate Slides as Greece Run Out of Options
When the leftist Greek government gained power they inherited a distressingly debt-riddled country with few options for recovery. Their best option would have been to butter-up Eurozone officials in order to acquire the desperately needed funds to settle huge loans. If they had paid off the International Monetary Fund (IMF) early, and bought back European Central Bank (ECB) bonds, they could have saved a massive amount of Euros and distanced themselves from creditor pressures.
However, the frayed relationship between Athens and Eurozone officials is now stretched to breaking point, with Greece’s options rapidly running out. Having only just paid the 1st instalment to the IMF by the skin of their teeth, the Greek government is unlikely to meet with further repayments down the road.
Claus Vistesen, chief euro zone economist at Pantheon Macroeconomics, said; ‘The country needs to repay the IMF over 2.8 billion Euros between now and July, with a 770 million Euros instalment due May 12 the next big hurdle. It is difficult to see how the economy can honour its IMF commitments in coming months without some form of aid.’
The Euro to South African Rand (EUR/ZAR) exchange rate dropped to a low of 12.6980 today.
South African Rand (ZAR) Exchange Rate Dives on US Dollar Gains
With the ongoing geopolitical difficulties in Europe, in addition to particularly weak trade data out of China, market sentiment cooled significantly. This saw the US Dollar advance thanks to its safe-haven properties and emerging-market assets decline.
Aiding the Rand’s downtrend was yet more load shedding from the nation’s most prolific energy provider, Eskom. ‘Eskom would like to assure customers that load shedding is implemented as a necessary measure to protect the power system. Any additional changes on the already vulnerable and constrained power system could lead to a change in the stage of load shedding at short notice. We will communicate if there is a need to change stages.’
The issues that Eskom have faced are reported to have cost the South African economy in excess of R400 billion, and those problems look far from abating with further power cuts predicted.
Euro to South African Rand (EUR/ZAR) Exchange Rate Forecast to Hold Gains
Although geopolitics is weighing on demand for the common currency, South Africa’s woes with regards to Eskom have become increasingly detrimental to demand for the Rand. Additionally, the stronger US Dollar is likely to see the Euro to South African Rand (EUR/ZAR) exchange rate hold gains for the remainder of the European session.
Tuesday’s Eurozone Industrial Production data may impact upon EUR/ZAR volatility.
The Euro to South African Rand (EUR/ZAR) exchange rate reached a high of 12.8570 today.