UPDATE 1-South African rand firms as focus shifts to inflation print next week

(Updates prices as of 1400 GMT, adds analyst comment in paragraphs 4-5)

JOHANNESBURG, Oct 18 (Reuters) – South Africa’s rand firmed against a weaker dollar on Friday, ahead of a domestic inflation reading next week which could provide clues on the central bank’s rate-cutting path.

At 1400 GMT, the rand traded at 17.57 against the dollar , about 0.6% stronger than its previous close. The currency is still down about 1% against the greenback this week.

The dollar last traded about 0.2% softer against a basket of currencies.

The rand’s recovery on Friday can be attributed to a broader dollar retreat, said Danny Greeff, co-head of Africa at ETM Analytics.

“The market is stabilising after a period of dollar strength as bets on aggressive rate cuts in the U.S. were pared and a higher probability of a Trump presidential election victory was being priced in,” Greeff added.

Next week, domestic investors will look to September’s consumer inflation figures which could provide clues on the South African Reserve Bank’s interest rate path.

The central bank cut its main lending rate for the first time in more than four years in September, after data showed headline inflation fell just below 4.5%, the middle of the central bank’s target range.

On Thursday, South Africa’s central bank governor Lesetja Kganyago said the country could move to a lower inflation target at little cost.

“One of the requirements for a stable currency is low inflation; therefore, any talk of lowering the inflation target should be mildly supportive of the ZAR,” ETM Analytics said in a research note.

On the Johannesburg Stock Exchange, the blue-chip Top-40 index last traded about 0.5% higher.

South Africa’s benchmark 2030 government bond gained, the yield down 2.5 basis points to 9.28%. (Reporting by Tannur Anders; Editing by Hugh Lawson, Bhargav Acharya)

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