The Euro to South African Rand (EUR/ZAR) exchange rate steadily advanced on Monday afternoon.
With the threat of a Greek exit from the Eurozone amplified as economists forecast that Athens will be unable to produce acceptable reforms, even after the deadline was extended, the shared currency softened versus most of its major peers. In addition, the single currency cooled in response to less-than-ideal domestic data results.
The South African Rand, meanwhile, softened versus most rivals as it tracks the Euro declination. A stronger US Dollar is also weighing on demand for the emerging-market currency. Continued issues with the nation’s leading energy provider, Eskom, is having an adverse impact on South Africa’s economic progress. Also, the xenophobic riot against immigrants has also aided the Rand depreciation.
The Euro to South African Rand (EUR/ZAR) exchange rate is currently trending in the region of 13.0288.
Euro (EUR) Exchange Rate Ticks Lower on Potential Grexit
With mounting speculation that the new Greek government will not be able to fill both its electoral promises and please creditors, the risk of a Greek exit from the Eurozone is weighing on investor confidence. Although Athens has been given an extension to the deadline for presenting acceptable reforms, many fear that it is only delaying the inevitable as they refuse to bend to austerity.
‘The Euro has come back under pressure to start the week amid ominous comments about the festering crisis in Greece. ECB policymaker Christian Noyer said the country may not find collateral for loans and warned that its exit from the Eurozone would be traumatic for the region as well as the world economy at large,’ stated Ilya Spivak, Currency Strategist, at DailyFX.
In addition to the threat of a Grexit weighing on demand for the common currency, a string of disappointing data results also lubricated the slide. March’s German Producer Prices cooled by -1.7% on the year, failing to meet with the market consensus of -1.6%. On the month, March’s German Producer Prices hit 0.1%; again unable to meet with the median market forecast of 0.2%. February’s Eurozone Construction Output softened by -2.8% on the month and by -3.7% on the year.
The Euro to South African Rand (EUR/ZAR) exchange rate has fallen to a low of 12.9174 today.
South African Rand (ZAR) Exchange Rate Declines on Stronger US Dollar
In addition to tracking Euro losses, the South African Rand experienced downward pressure as the US Dollar strengthened. The ‘Greenback’ (USD) advance can be attributed to rising demand for safe-haven assets amid geopolitical tensions in Europe.
The Rand also saw losses in response to ongoing riots against immigrants. ‘The claim that ‘foreigners’ are taking jobs from South Africans is an argument that is always made,’ says Professor Loren Landau, director of the African Centre for Migration and Society (ACMS) at Wits University: ‘As if it justifies killing.’
Dr Zaheera Jinnah, an anthropologist and researcher, said that there were misconceptions about the size of the international migrant community in South Africa: ‘There is a disconnect between perception and reality largely because there hasn’t been data available until now. A lot of what has been said and reproduced is based on hearsay and anecdotal evidence or myths.’
Euro to South African Rand (EUR/ZAR) Exchange Rate Forecast to Hold Gains
Given that the South African asset tracks single currency movement, and with several factors weighing on demand for the Rand, the Euro to South African Rand (EUR/ZAR) exchange rate is likely to hold gains for the remainder of the European session.
There is the potential for heightened EUR/ZAR volatility on Tuesday with German Economic Sentiment data due for publication. With that being said, geopolitics is likely to be the focal point of EUR/ZAR trade.
The Euro to South African Rand (EUR/ZAR) exchange rate climbed to a high of 13.0380 today.