JOHANNESBURG, July 14 (Reuters) - The South African rand weakened on Friday, bringing this week's rally to a halt as prolonged power blackouts and expectations that the central bank will leave its main interest rate on hold next week weighed on the investor mood.
The risk-sensitive rand has been a big beneficiary of data this week showing cooling U.S. inflation, which has stoked speculation the Federal Reserve could pause its interest rate hikes after this month and driven the dollar to its weakest since April 2022.
The rand broke below 18 to the dollar for the first time in three months on Thursday and as of Friday's open was up more than 5% for the week.
But by 1045 GMT, the rand had moved back above 18 to the dollar and was trading down about 0.7% from its Thursday closing level at 18.05 .
Rand Swiss portfolio manager Gary Booysen said the fact the South African Reserve Bank (SARB) was likely to leave its repo rate (ZAREPO=ECI) unchanged at next week's monetary policy meeting could prompt investors to sell the rand in advance, given the Fed was expected to hike once more in a decision due on July 26.
"There is another risk factor that poses a threat to the South African rand - the return of level 6 load shedding. Historically, there has been a correlation between power cuts and a weakening rand," Booysen added.
South Africa's struggling utility Eskom said on Thursday that it would extend 'Stage 6' power cuts, its highest level on record, into the weekend as cold weather drives up demand and power station breakdowns constrain supply.
Stage 6 outages mean many businesses and households are in the dark for 10 hours or more per day.
On the Johannesburg Stock Exchange, the blue-chip Top-40 index (.JTOPI) last traded about 0.4% stronger. The benchmark 2030 government bond was weaker, with the yield up 4.5 basis points to 10.430%.
Reporting by Tannur Anders Editing by Alexander Winning
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