The South African rand firmed against the dollar in Wednesday's trading session as the country's markets shrugged off mixed domestic economic signals released by the statistics agency.

At 1332 GMT, the rand traded at 16.3150 against the dollar, about 0.6% firmer than Tuesday's close, hovering around its strongest level since August 2022.

The dollar was flat against a basket of currencies as investors awaited US President Donald Trump’s speech at Davos, after his tariff threats triggered a broad selloff in US assets.

South African inflation rose slightly in December, as expected, but analysts said they still expected the central bank to deliver several interest rate cuts this year as price pressures remain contained.

The modest rise to 3.6% from 3.5% in November keeps the headline rate within the 1 percentage point tolerance band of the central bank's 3% target, and the statistics agency said average inflation for 2025 of 3.2% was the lowest in 21 years.

"Consumer price inflation is expected to drop to 3.0% year-on-year next month and dipping below 3.0% until the fourth quarter of 2026," said Investec economist Annabel Bishop.

She added that the main drivers would be lower food and energy prices and a stronger local currency.

South African retail sales rose 3.5% year-on-year in November after increasing by a revised 3.0% in October, Statistics South Africa figures showed in a separate report on Wednesday.

On the Johannesburg Stock Exchange, the Top-40 index last traded up 0.3%.

South Africa's benchmark 2035 government bond was also firmer, with the yield falling 7.5 basis points to 8.37%.