Euro to South African Rand (EUR/ZAR) Exchange Rate Forecast to Rally as Eskom Woes Overshadow Positive South African Data Results

The Euro to South African Rand (EUR/ZAR) exchange rate rallied by around 0.93% on Tuesday afternoon. Although geopolitical tensions between Greece and Eurozone officials has far from abated, the shared currency strengthened on Tuesday in response to Greece managing to pay the International Monetary Fund (IMF) €750 million ahead of schedule. The South African Rand, meanwhile, softened versus the majority of its most traded currency rivals despite registering positive manufacturing growth. The declination is the result of continued difficulties with the nation’s leading energy provider, Eskom. With load-shedding and sustained black-outs, the clapped-out grid can’t handle increasing demand for power. The Euro to South African Rand (EUR/ZAR) exchange rate is currently trending in the region of 13.5870.

Euro Gains after Greece make IMF Payment
With many analysts speculating that Greece would not be able to make the large loan repayment to the IMF, the fact that they paid in full and earlier than expected saw the common currency advance versus the majority of its most traded currency competitors. The gains are expected to be short-lived, however, with many fearing that Greece will not be able to secure the much-needed bailout funds in order to pay future loan repayments. Additionally, it has transpired that Greece was forced to tap into emergency funds in order to pay the €750 million due today. This is likely to weigh on investor confidence as Greece will soon run out of cash completely. ‘The central bank governor put forth the idea to tap the 650 million Euros in the holding account, which needed IMF approval,’ a government official said, declining to be named. ‘Governor Stournaras made the arrangement with the IMF and on Saturday we got their okay and the account was unlocked.’ The Euro to South African Rand (EUR/ZAR) exchange rate dropped to a low today of 13.4330.

South African Rand Dives on Eskom Difficulties

The South African Rand softened versus the majority of its most traded currency peers on Tuesday despite relatively positive domestic data results. On the year, March’s Manufacturing Production increased by 3.8%; eclipsing the median market forecast of a 0.4% growth. On the month, March’s Manufacturing Production gained by 1.2%; bettering the market consensus of 0.44% growth. Although this data was positive, the Rand declined in response to ongoing difficulties with the energy provider Eskom. With outdated equipment that can’t handle demand, Eskom has seen a long period of rolling blackouts in order to save energy. This has cost the South African economy a significant amount of money. ‘Any unexpected changes on the vulnerable and constrained power system could lead to a change in the load shedding stage at short notice,’ stated Eskom.

Euro to South African Rand (EUR/ZAR) Forecast to Hold Gains
Although the single currency is likely to decline amid fears that Greece will run out of money, the troubles with Eskom is likely to keep the Rand bearish. Therefore, the Euro to South African Rand is likely to hold gains for the remainder of Tuesday’s European session. The Euro to South African Rand (EUR/ZAR) exchange rate climbed to a high of 13.6878.