UPDATE 1-South African rand gains on Fed rate cut bets

(Updates prices to reflect afternoon trade)

JOHANNESBURG, Dec 7 (Reuters) - The South African rand gained on Thursday on increasing bets that the U.S. Federal Reserve might implement interest rate cuts early next year.

At 1506 GMT, the rand traded at 18.8250 against the dollar , up over 0.7%, while the dollar was last trading 0.25% weaker against a basket of global currencies.

A slew of economic data has illustrated a softness in the U.S. labour market and has strengthened the market's view of a pivot in the Fed's policy through next year, said Bheki Mahlobo, a market analyst at ETM Analytics.

"The pricing in of rate cuts from potentially as early as March has seen UST (U.S. Treasury) yields trading lower, improving the outlook on riskier assets such as the ZAR, with the currency further supported by lower oil prices," Mahlobo said.

Global investor focus will now turn towards payrolls data on Friday, which could give hints on the future interest rate path of the world's biggest economy. The rand often takes cues from global factors such as U.S. monetary policy in addition to local drivers.

Locally, South African Reserve Bank data earlier showed the country's current account deficit narrowed sharply in the third quarter to 0.3% of gross domestic product from a revised 2.7% in the second quarter.

Separately, South Africa's net foreign reserves rose to $56.319 billion at the end of November from $55.510 billion in October.

On the Johannesburg Stock Exchange, the blue-chip Top-40 index closed over 0.8% lower.

South Africa's benchmark 2030 government bond was marginally stronger, with the yield down 0.5 basis point to 9.975%. (Reporting by Tannur Anders and Bhargav Acharya, Editing by Toby Chopra)