EUR/ZAR Exchange Rate Sinks as Safe-Haven Demand Compromised by Covid-19 Vaccine Hopes
The Euro to South African Rand (EUR/ZAR) exchange rate fell today, with the pairing currently trading around R18.14.
The risk-sensitive South African Rand extended its gains today following the announcement from pharmaceutical giant Moderna that their coronavirus vaccine trials had proven 94.5% effective.
Consequently, this has buoyed hope for the South African economy and increased demand for risky assets.
Annabel Bishop, an economist at Investec, explains:
‘The [South African] Rand is however likely to be gaining some underpin of support from the substantial advances that are occurring around the world in a large number of vaccine trials, with many making steady progress towards significant, but not yet mass, production levels.’
However, ZAR investors are remaining cautious as Covid-19 cases in South Africa topped 751,000.
Any further increase coronavirus cases in South Africa could quickly drag down the ZAR/EUR exchange rate.
Euro (EUR) Sinks as Covid-19 Uncertainty Wracks Eurozone’s Economic Outlook
The Euro (EUR) is subdued today despite signs of Covid-19 cases easing off through much of Europe.
Nevertheless, following a surge of new cases over the weekend, EUR investors remaining cautious.
A glimmer of hope appeared, however, after the French Health Minister, Oliver Veran, said:
‘Everything points to France having passed the peak of the Covid-19 pandemic’.
Germany is also seeing a slight recovery in Covid-19 numbers.
Lothar Wieler, the head of Germany’s disease control agency RKI, said:
‘I am cautiously optimistic. [T]he curve is rising somewhat less steeply, it is flattening.’
Meanwhile, the safe-haven Euro is suffering today as investors seek out riskier assets on hopes of a Covid-19 vaccine being on the horizon.
As a result, demand for the single currency has slipped this week following several pharmaceutical giants announcing successful trials in Covid-19 vaccines.
EUR/ZAR Outlook: Covid-19 Vaccine Hopes to Boost South African Rand
Euro (EUR) traders will be awaiting tomorrow’s publication of the latest Eurozone Construction Output data for September.
Any improvement in the Eurozone’s economy would prove EUR-positive.
Tomorrow will also see a speech from the European Central Bank’s President Christine Lagarde.
If she is notably downbeat in her commentary on the Eurozone’s economy, however, we would see the EUR/ZAR exchange rate suffer.
The South African Rand, meanwhile, could continue to head higher if hopes of a Covid-19 vaccine are sustained throughout the week.