Johannesburg - South Africa's 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 06h45 GMT the rand had gained 0.49 percent to 12.0725 per dollar, from a close of 12.1325 overnight in New York, boosted slightly after South Africa's 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.
South Africa's trade deficit narrowed to R8.48 billion ($699 million) in February from R24.22 billion in January, after a substantial rise in exports, but was still wider than expected.
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 percent.
At 10h00 GMT South Africa's Finance Minister Nhlanhla Nene announces the government's budget deficit estimate for the 2014/15 fiscal year ending March 31.
Reuters