The Euro to South African Rand (EUR/ZAR) exchange rate advanced sharply on Thursday as emerging market currencies were weakened by a stronger US Dollar. The Rand was also under pressure from concerns over power supply worries and the deployment of the South African army in order to quell xenophobic violence.
The Euro to South African Rand (EUR/ZAR) Exchange Rate Climbed to A Session High of 13.2059
A strengthened US Dollar caused emerging market currencies like the Rand to weaken on Thursday and was the main driver for the currency’s decline against the Euro.
Strong housing data out of the world’s largest economy improved sentiment towards the ‘Greenback’ as it caused investors to raise their bets that the US economy is regaining momentum after a blip earlier in the month.
Also putting heavy pressure on the Rand was news that Eskom, South Africa’s main power utility was battling its worst power outages since 2008. The company was forced to impose rolling black outs for a tenth consecutive day as it sought to get the situation under control. The news that the construction of two urgently needed power stations has been delayed added to the nation’s electricity woes.
The nation’s power grid gets more constrained in the evening, especially now that the southern hemisphere is entering the cold season. The prognosis to load shed is high on Thursday evening.
‘The demand for electricity on a typical day is about 32,000 MW. The installed capacity is 43,000 MW. We lose about 5,400 MW of electricity to shut down and do planned maintenance. South Africa’s power grid is short of about 3,000 MW on any given day,’ said Eskom’s acting chief executive Brian Molefe.
‘The fabric of the nation is splitting’
The deployment on soldiers onto South African city streets has also put the Rand under pressure. Investors are jittery that the bout of xenophobic violence that has resulted in numerous deaths could escalate.
With the nation’s unemployment rate at 24%, many native South Africans are blaming immigrant workers for their plight and difficulty to find work.
Desmond Tutu, a former archbishop of Cape Town and an anti-apartheid stalwart, captured the mood of many: ‘Our rainbow nation that so filled the world with hope is being reduced to a grubby shadow of itself. The fabric of the nation is splitting.’
The Rand will decline further later in the session if US jobless claims data comes in positively. If the data disappoints then the Rand could claw back earlier losses against the Euro and other peers.