South Africa's rand rallies as U.S. trade deficit sinks dollar

At 0635 the rand gained 0.25 percent to 11.9500 per dollar, adding to the near half-a-percent gains in the previous session as the unit moved further away from the 12.00 mark.

"Technically the rand also looks due a further corrective move with the failure to break 12.0800 over the past few days. A move back below 11.86 would confirm a lower high on the medium term charts," said John Cairns of Standard Bank in a note.

The index measuring the dollar against a basket of major currencies was down 0.46 percent by 0635 GMT, with safe-haven assets such as gold surging on the back of the patchy U.S. data.

The rand's modest recovery, after slipping more than 3 percent since April, may come under pressure by a return to dollar strength with the U.S. non farm payrolls report due on Friday likely to show an improved labour market.

"There are concerns that above R12 to the dollar trading levels reached in March could be around for some time," analysts at NKC Independent Economists said.

Yields on government bonds continued to rise, with the benchmark paper due in 2026 adding 3 basis points to 8.12 percent, its highest in two weeks.

In domestic data, HSBC's private sector activity index is due later in the session.