The EURZAR is the ticker symbol for the Euro and South African rand exchange rate. The EUR-ZAR is an exotic pair because one of its constituent currencies is that of an emerging market, South Africa. Exotic currency pairs typically feature low trading volumes, lower overall liquidity and are traded with relatively higher spreads than major currency pairs.
In the EUR/ZAR Forex rate, the EUR is the base currency, while the ZAR is the quote currency. Thus, the price of the EURZAR at any given time represents the amount of South African Rands it would take to exchange for one unit of the euro.
History of the EURZAR
The EURZAR combines two vital currencies in the global economy. The euro is the official currency of the Eurozone, which consists of 19 states of the European Union. The euro was introduced on January 1st, 1999, and it is administered and managed by the European Central Bank. The euro is the second-largest currency in the world as of November 2021 and the second most used (both in reserve and circulation), trailing only the US dollar among the major global currencies.
The euro has been credited with promoting economic stability, as well as trade and tourism within the European Union. As well, the euro has also helped lower interest rates within countries that make up the EU. The common currency is very actively traded, and it adds liquidity to any currency with which it is paired. Some of the biggest economies within the Eurozone include Germany, Italy, France, and Spain. The euro is freely floated in the market and not pegged to anything.
Introduced in 1961, the ZAR is the official currency of South Africa, a leading economy in Africa. The ZAR is also used within the Southern Africa Common Monetary Area that includes Namibia, Lesotho, and Eswatini. The ZAR is administered and managed by the South Africa Reserve Bank. The ‘rand’ derived its name from ‘Witwatersrand,’ a reference to a ridge in the country that is rich in massive gold deposits. The ZAR was initially pegged to the USD in its early days, but it is nowadays classified as a free-floating currency since the end of Apartheid in South Africa. South Africa is the most advanced and diversified economy in Africa, as well as a major commodity exporter in the world. The ZAR is the most globally integrated currency in that emerging continent.
EURZAR Historical Price Performance
The EURZAR traded at around 9.00 in the early 2000s. It drifted to highs of circa 15.00 by mid-2008 but tumbled again to the 9.00-region due to the effects of the Great Recession that hit the euro particularly hard. Since then, it has maintained a steady upward trajectory. However, in the last few years, it has traded within the 15.00-20.00 range. In this time, the currency has been influenced by fundamental events such as the Brexit (Britain exiting the EU), the South African Eskom electricity crisis, as well as the 2020 coronavirus pandemic.
Major Bodies Influencing the EURZAR
The European Central Bank
The ECB is the single body that has the biggest influence on the euro. The bank sets the overall monetary policy within the Eurozone and oversees other individual nations’ central banks. The ECB is also tasked with maintaining the price stability of the euro. Euro traders closely monitor interest rate releases and statements as well as the active involvement in the markets in the form of asset purchases or sales.
The South African Reserve Bank
The SARB is the Central Bank of the Republic of South Africa, and its main mandate is to achieve and maintain price stability. In recent years, the SARB has set rates that help it achieve its objects. Higher rates will make the ZAR more valuable, whereas lower rates will lower the value of the ZAR.
Positively correlated assets tend to move in the same direction over time, whereas negatively correlated assets tend to move in opposite directions over time. The EURZAR has a positive correlation with currency pairs such as the CHFZAR, USDZAR, EURPLN, USDPLN, and USDMXN. The EURZAR has also maintained negative correlations with pairs such as ZARJPY, GBPUSD, and GBPCHF.