Johannesburg - The rand firmed close to half a percent against the dollar early on Wednesday as the US currency floundered, dragged lower by weaker share prices and worries over a nuclear deal with Iran.
By 08:45 the rand had gained 0.49% to R12.0725/$, from a close of R12.1325 overnight in New York, boosted slightly after the trade deficit narrowed sharply in February.
"The downside might extend into this morning but does not seem to have legs to sustain past 12.00," said John Cairns, a currency trader with Rand Merchant Bank.
The trade deficit narrowed to R8.48bn in February from R24.22bn in January, after a substantial rise in exports, but was still wider than expected.
READ: February trade deficit narrows to R8.48bn
Traders expect the local unit to come under pressure as domestic growth prospects remain weak, exacerbated by crippling power shortages and the still wide current account deficit.
"Local data has been unambiguously poor... optimism over a narrowing in the current account deficit may be overdone," Cairns added.
Government bonds were flat in early trade, with the highly-trade instrument due in 2026 flat at 7.77%.
At 12:00 Finance Minister Nhlanhla Nene announces the government's budget deficit estimate for the 2014 to 2015 fiscal year ending March 31.