JOHANNESBURG, Sept 27 (Reuters) - South Africa's rand extended gains against the dollar on Friday, hitting a fresh 20-month high amid improved risk appetite and positive sentiment at home.

At 1400 GMT, the rand traded at 17.125 against the greenback , 0.35% firmer than its previous close. It earlier hit 17.075 per dollar, its strongest level since early February 2023.

The dollar index was last down 0.31% against a basket of currencies after a reading of U.S. inflation indicated price pressures continue to cool.

The rand has been on an upward trajectory since a big interest rate hike by the Federal Reserve last week, hitting repeated 20-month highs.

"The rand has continued to strengthen due to a favourable risk-on trading environment and a generally weaker U.S. dollar," said Shaun Murison, senior market analyst at IG.

Analysts say the improvement in South Africa's risk profile following the formation of a coalition government after an election in May has also contributed to the currency's strength.

On the stock market, the Top-40 (.JTOPI) , opens new tab index was up about 0.5%.

South Africa's benchmark 2030 government bond was stronger, with the yield down 2.5 basis points at 8.805%.

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https://www.reuters.com/markets/currencies/south-african-rand-holds-gains-against-dollar-2024-09-27/