The Euro to South African Rand exchange rate ended the week stronger as concerns over ongoing civil unrest and power supply worries in Africa’s most advanced economy combined with fears over a potential Greek exit from the Eurozone.
The Euro to South African Rand (EUR/ZAR) Exchange Rate Reached A Session High Of 13.2592 Last Week
The South African Rand weakened sharply against the Euro and other major peers over the course of the week as an outbreak of xenophobic violence escalated. Unrest was reported in Johannesburg and other parts of the nation. The situation deteriorated by such an extent that the South African government deployed the army in order to try and quell the violence.
The unrest began three weeks ago, and has led to more than 5,000 immigrant workers fleeing to refugee camps and many more returning to their home nations. The death toll has also risen as native South Africans launched attacks on immigrants who they see as stealing their jobs. One Mozambican man was stabbed to death in Alexandra Township last Saturday in scenes that provoked widespread outrage after the killing was captured in graphic newspaper photographs.
Also weighing heavily upon the Rand are ongoing concerns over the impact of power cuts to the nation’s economy. With power utility company Eskom, struggling to keep the lights on, the nation’s manufacturing sector is expected to have taken a huge hit to productivity.
The currency is forecast to make further declines next week as worries mount over potential worker unrest in the gold mining industry. Sources in the National Union of Mineworkers said that the union is going to demand a 75% pay increase for workers in the gold sector next week. The rise is likely to be denied and as such, we can expect industrial action to follow suit.
Greece Worries Forecast To Weigh On Euro
The Euro meanwhile will likely come under pressure from continuing concerns over the Greece situation. Against the Rand, the single currency will likely remain stronger but further gains could be restrained, as the markets grow increasingly impatient that no deal has been reached between Athens and its creditors in the Eurozone.
With no market moving economic data due for the South African Rand next week, its movements will depend on data releases out of the USA and the Eurozone. If US data continues to disappoint then the Rand could find some support, albeit any gains will be muted due to South Africa’s domestic troubles.
Deterioration in South Africa’s power supply situation or an escalation in the civil unrest will send the Rand falling further.
The Euro could receive support next Friday if the latest Eurozone unemployment and inflation data adds to signs that the region’s economy is improving.
The Rand could make gains. If weak US data causes investors to raise their bets that the Federal Reserve will delay hiking interest rates until later in the year.
