S.Africa's rand at 3-1/2 week highs, bonds firm
* Rand gains reflect dollar's global weakness
* Bonds edge up, yields dip lower
JOHANNESBURG, April 26 (Reuters) - South Africa's rand clung to 3-1/2 week highs against the dollar on Thursday and government bonds edged firmer as prospects of interest rates staying depressed in the United States boosted currencies that offer higher yields.
Producer inflation data due out at 0930 GMT should do little to alter the market view that domestic interest rates will stay unchanged this year as economic growth prospects remain fairly positive while the inflation outlook is largely benign.
By 0643 GMT the rand traded 0.19 percent firmer at 7.7280 to the greenback compared with Wednesday's close at 7.7420. It briefly touched 7.7250 earlier on Thursday, its strongest level since April 4, according to Reuters' data.
The dollar/rand moves mainly reflected overseas trends, with the greenback on the ropes against major currencies after the Federal Reserve signalled it would maintain a dovish policy stance as the U.S. economy continues to struggle.
But persistent concerns about debt problems in the euro zone, South Africa's main trading partner by region, could cap any significant further rand gains.
"Simmering tensions in the euro zone are likely to come back to haunt the euro, which we see weakening in the medium term, dragging the rand down with it," Standard Bank strategist Nomvuyo Guma said.
Government bonds edged up slightly in early trade, and yields, which move inversely to the price, dipped.
The yields for the benchmark three-year and 14-year bonds each gave up a basis point to 6.485 percent and 8.205 percent respectively.
South African financial markets will be closed on Friday for the Freedom Day holiday and trading will resume on Monday. (Reporting by Stella Mapenzauswa, editing by Ed Stoddard)
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