The rand gained to a seven-week high against the dollar as gold advanced after rising violence in Libya boosted oil to a 29-month high, stoking inflation concern, and as South African reserves climbed the most in 11 months. The currency appreciated as much as 0.5 percent to 6.9132 per dollar, the strongest since Jan. 14, before trading 0.1 percent up at 6.8699 by 4:39 p.m. in Johannesburg. Against the euro, the rand added less than 0.1 percent to 9.6133. Gold rose as much as 1.2 percent to $1,444.95 an ounce, and oil climbed 2.4 percent to $106.95 a barrel as fighting increased between Libyan rebels and troops loyal to Muammar Qaddafi, reducing the nation’s crude-oil output by as much as 1 million barrels a day, the International Energy Agency said. Gross reserves rose 4 percent to $47.3 billion in February from the previous month, as the central bank boosted foreign currency purchases and the dollar weakened, raising the value of holdings in other currencies, the Reserve Bank said on its website today. Rising oil prices “could again translate into broad-based dollar weakness as a result of further fears that the European Central Bank would need to hike its lending rates well before the Federal Reserve due to the inflationary implications of high oil prices” and are a “potential catalyst for renewed rand strength,” Standard Bank strategists, led by Johannesburg-based Michael Keenan, wrote in a report today. The central bank purchases may “re-inspire rand bulls, because it would imply that the rand has been strong despite ongoing dollar purchases from South African authorities,” the strategists said. Rand Strength ECB President Jean-Claude Trichet on March 3 said the central bank may boost its benchmark rate from a record-low 1 percent when policy makers meet in April because of quicker inflation. The Federal Reserve’s target rate for overnight loans between banks is in a range from zero to 0.25 percent. The rand has climbed 6.1 percent against the dollar since Feb. 15. The currency strengthened 11 percent in 2010, the best performer among more than 20 emerging-market currencies against the dollar after Malaysia’s ringgit. That’s helped to keep inflation inside the central bank’s 3 percent to 6 percent target range, enabling the bank to lower its benchmark interest rate to a 30-year low of 5.5 percent. The Reserve Bank stepped up foreign-currency purchases after the rand’s appreciation last year reduced the competitiveness of South Africa’s exports, it said today. “We do intervene in the markets in order to build our reserves, not to target the level of the exchange rate,” Reserve Bank Governor Gill Marcus said on Feb. 23. “We do not have a targeted reserve. We intervene as and when it is appropriate for us to do that.” Bonds Decline South Africa’s benchmark 13.5 percent security due September 2015 fell for a third day, losing 21 cents to 120.852 rand and raising the yield give basis points to 7.92 percent. Gold and platinum account for about a fifth of South Africa’s export revenue. The nation, with more than $2.5 trillion in mineral reserves, is the world’s richest nation by “commodity wealth” followed by Russia and Australia, according to Citigroup Inc. Trichet, who last week announced the ECB may raise interest rates next month to fight mounting inflation pressures in the euro area, said today that central bankers in Basel discussed “spikes” in oil, food and commodity prices. To contact the reporter on this story: Chris Kay in London at ckay5@bloomberg.net To contact the editor responsible for this story: Gavin Serkin at gserkin@bloomberg.net.

Source