South African rand firms as markets look to Fed rate cut

JOHANNESBURG, Dec 5 (Reuters) - South Africa's rand strengthened on Thursday on expectations of an interest rate cut by the U.S. Federal Reserve later this month.

At 1513 GMT, the rand traded at 18.05 against the dollar , about 0.7% stronger than its previous close.

The dollar index was last down 0.4% against a basket of currencies.

"The rand is positioned for a strong year-end performance against the USD, supported by expectations of a U.S. rate cut," said Zain Vawda, market analyst at MarketPulse by OANDA.

The Fed's next rate-setting meeting is over Dec. 17-18, with the implied chance of a cut now around 75%.

On Friday, markets will look to U.S. non-farm payrolls for further clues about the health of the world's largest economy.

Like other risk-sensitive currencies, the rand often takes direction from global drivers like U.S. economic data.

On the domestic front, data showed on Thursday that South Africa's current account deficit was broadly unchanged from the second to the third quarter of this year, staying at 1.0% of gross domestic product.

On the stock market, the Top-40 index closed about 0.7% up.

South Africa's benchmark 2030 government bond was weaker, with the yield up 2.5 basis points to 8.95%. (Reporting by Bhargav Acharya and Tannur Anders; Editing by Susan Fenton)