The rand weakened against the euro and pound on concern civil unrest in the Middle East may be spreading and on speculation the nation’s central bank is building foreign reserves to weaken the currency. South Africa’s currency depreciated as much as 0.6 percent to 9.8867 per euro before trading 0.5 percent weaker at 9.8796 as of 1:41 p.m. in Johannesburg. The rand also declined against the pound, losing 0.3 percent to 11.7284, for a second day of losses. Against the dollar the rand added less than 0.2 percent to 7.2951. Demonstrators in Bahrain, Yemen and Iran clashed with security forces yesterday as they challenged their governments following the successful ouster of Egyptian President Hosni Mubarak through populist protest. Stocks fell in Asia on renewed concern China will raise interest rates, raising the prospect of a slowdown in the world’s fastest growing major economy. “It’s not a great risk picture at the moment,” David Gracey, head of foreign-exchange trading at Nedbank Capital in Johannesburg, said by phone from the city. “The situation in Egypt seems to have calmed down but we’re now seeing similar events in other parts of the Middle East.” Government bonds rose in South Africa for a third day, with the 13.5 percent security due September 2015 adding 18 cents to 121.61 rand. The yield on the bond fell 4 basis points to 7.80 percent. South Africa’s currency also weakened on speculation the central bank was continuing to boost foreign reserves in an attempt to weaken the rand. Finance Minister Pravin Gordhan pledged in his mid-term budget speech in October to transfer part of the government’s higher-than-estimated tax revenue to the central bank to accumulate reserves and weaken the rand. Reserves “The South African Reserve Bank is thought to be utilizing revenue overruns from the budget to facilitate the accumulation of reserves,” Tradition Analytics analysts led by Quinten Bertenshaw in Johannesburg, wrote in a client note today. South Africa’s gross reserves rose 3.7 percent in January to $45.5 billion in January, the biggest increase since March, the Pretoria-based Reserve Bank said on Feb. 7. The rand slumped 7.6 percent against the dollar in January. Reserve accumulation by the central bank “has been going on for the past few weeks and we continue to see that,” said Nedbank’s Gracey. A Bloomberg News call to the Pretoria-based central bank during regular office hours today was not answered. To contact the reporter on this story: Garth Theunissen in London gtheunissen@bloomberg.net To contact the editor responsible for this story: Daniel Tilles at dtilles@bloomberg.net

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