Euro to South African Rand (EUR/ZAR) Exchange Rate Soft; Some Employers Rebuff Deal
The Euro (EUR) is currently trading up at 14.2460 against the South African Rand (ZAR), reaching session highs of 14.2730 whilst stooping to lows of 14.1757. This exchange rate follows the South African Unemployment Rate figures which have risen to higher than economists’ forecasts, at 25.5%.
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The Euro has come under fire by many for trading unsustainably high, with the European Central Bank needing a lower Euro to help the Eurozone recovery.
Morgan Stanley currency strategist Ian Stannard commented: ‘The consensus has been for a lower Euro, but it’s gone higher.’
However President for the European Central Bank Mario Draghi introduced unorthodox stimulus methods recently, with more expected in the near future.
An expert in the field for Rabobank, Jane Foley, commented: ‘Since May’s ECB meeting there has been a deterioration in sentiment with respect to the Euro.’
As the Euro lies amid geo-political tensions regarding Russia and Ukraine, the Eurozone recovery remains fragile. Moreover the South African economy is also delicate with fears of recession prominent.
Economist Christie Vijoen stated prior to the South African figures release: ‘Trade data so far suggests the current account deficit could widen to more than 6% of GDP in Q2. South Africa’s economy is dependent on foreign portfolio flows to fund this shortfall, which leaves the Rand extremely vulnerable to shifts in sentiment toward emerging markets.’
This week has seen a more optimistic foundation for the Rand as the National Union of Metalworkers of South Africa (NUMSA) strike is reported to have come to an end.
NUMSA spokesperson Irvin Jim commented: ‘The settlement offer has been overewhelmingly and unanimously accepted by our members. This is a massive victory given the pittance offer at the end of the deadlock.’ Workers from the strike are expected to resume their regular working hours on July 31st.
However, there is some concern over the work stoppage resuming as some employers have vocalised that they are not happy with the new deal’s conditions after the government’s labour department were forced to intervene as a mediator.
One spokesperson commented: ‘We are not happy with the (pay) deal that has been done and will lock out the striking workers from Tuesday.’
The Rand could gain some stability if the strikes are truly quashed, however; with some employers seemingly less than happy with the deals, it could cause more tensions within the South African economy. The current ZAR to EUR exchange rate is residing at 0.0702.