The South African rand held steady in early Thursday trade as investors assessed the US Federal Reserve's hawkish stance, which dampened expectations for near-term interest rate cuts, while conflict in the Middle East kept risk sentiment fragile.

At 0654 GMT, the rand traded at 17.01 against the dollar, little changed from its previous close of 16.9975. The Fed struck a hawkish tone on Wednesday as surging energy prices arising from the Iran conflict clouded the inflation outlook.

The central bank held rates steady, but warned of risks that rising energy costs could fan a more persistent inflation spike. Like other risk-sensitive currencies, the rand often takes cues from global drivers, in addition to domestic economic data.

"The rand lost around 1.8% yesterday on the back of the stronger Dollar and rising energy cost concerns. The local currency closed at R16.98 and is trading unchanged against the Dollar this morning," said Wichard Cilliers, head of market risk at Treasury ONE.

Economists also expect South Africa's central bank to leave its main interest rate unchanged at its March 26 policy announcement.

"Monetary policy is likely to remain tighter for longer over the coming months, delaying rate cuts unless energy prices ease substantially," said ETM Analytics in a research note. South Africa's benchmark 2035 government bond was flat in early deals, with the yield at 9.1%.