South African rand firms as dollar heads for weekly drop

(Updates to reflect afternoon trade)

JOHANNESBURG, May 27 (Reuters) - The South African rand strengthened on Friday, as the dollar was on track for its second straight weekly decline as traders pared expectations for U.S. Federal Reserve interest rate hikes.

At 1610 GMT, the rand ZAR=D3 traded at 15.5975 against the dollar, around 0.7% stronger than its previous close.

The dollar index =USD , which measures the safe-haven currency against a basket of six other major currencies, fell as low as 101.43, its weakest since April 25.

The dollar index was on course for a loss of more than 1% this week, while the rand was headed for a weekly gain of around 1.5% against the dollar.

Minutes from the Fed's May meeting this week showed most participants believed 50 basis-point hikes would be appropriate at the June and July policy meetings.

However, many thought big, early hikes would allow room to pause later in the year to assess whether tighter policy is helping to tame inflation.

This week has been relatively light for South African economic data, with the rand often trading at the mercy of global market moves.

Next week is more busy on the domestic data front, with releases like the April budget balance ZABUDM=ECI , first-quarter unemployment numbers ZAUNR=ECI and whole-economy purchasing managers' index ZAPMIM=ECI due.

Johannesburg-listed stocks closed in positive territory, with the All-share index .JALSH rising 1.4% and the top-40 index .JTOPI also 1.4% higher.

The South African government's benchmark 2030 bond ZAR2030= firmed slightly, with the yield falling 5.5 basis points to 9.72%.

Reporting by Anait Miridzhanian and Alexander Winning; Editing by Amy Caren Daniel

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