The rand weakened against the euro for a third day on speculation South Africa will lag behind the European Central Bank in raising interest rates, eroding the country’s yield advantage. South Africa’s currency declined as much as 0.6 percent to 9.7779 per euro, and traded 0.2 percent weaker at 9.7425 at 10:29 a.m. in Johannesburg. It was little changed at 6.7683 per dollar. The Reserve Bank’s Monetary Policy Committee will tomorrow hold its benchmark interest rate at 5.5 percent, according to all 22 economists surveyed by Bloomberg. “The rand’s carry-trade appeal could diminish this week if the Reserve Bank delivers a dovish policy statement and keeps the repo rate at 5.5 percent,” Michael Keenan, an analyst at Johannesburg-based Standard Bank Group Ltd., wrote in a research note. In the carry trade, investors borrow in currencies of countries with low interest rates and invest the proceeds in high-yield currencies. The ECB last month raised its benchmark rate by 0.25 percentage point to 1.25 percent and said it would monitor inflation closely in coming months. Ten-year government bonds gained for a fourth day, driving yields to the lowest level in four months. The 6.75 percent notes due 2021 rose 14 cents to 89.27 rand. The yield fell two basis points, or 0.02 percent, to 8.37 percent, the lowest since Jan. 13. To contact the reporter on this story: Robert Brand in Cape Town at rbrand9@bloomberg.net To contact the editors responsible for this story: Gavin Serkin at gserkin@bloomberg.net.

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