* Rand 0.87 pct firmer
* Bonds move in step with stronger rand
* Morgan Stanley (NYSE: MS ) raises target prices of banks
* Bank index touches 8-1/2-month high (Adds stocks, fresh analyst quotes)
JOHANNESBURG, Jan 25 (Reuters) - South Africa's rand firmed against the dollar on Friday, supported by a pick up in risk-taking, while banks topped the blue-chip index .JTOPI after Morgan Stanley raised their target prices.
At 1539 GMT, the rand ZAR=D3 traded at 13.6000 per dollar, 0.87 percent firmer than its New York close of 13.7175 on Thursday.
The rand also found support from a weaker dollar as concerns about a prolonged U.S. government shutdown, at a time when global growth is already slowing, weighed on the greenback.
"The rand began the week on the backfoot after the IMF trimmed its global growth forecasts. This prompted risk-averse investors to opt for the safety of the greenback," said economists at NKC African Economics in a note.
"However, the rand remained resilient, despite volatile U.S. dollar movements, recovering earlier losses to post a second consecutive weekly gain."
In fixed income, bonds moved in step with a stronger rand, with the yield on the benchmark government bond due in 2026 ZAR186= dropping 10 basis points to 8.71 percent.
In the equities market, banks topped the gainers on the Top-40 blue chip index .JTOPI after Morgan Stanley raised target prices for Standard Bank SBKJ.J , Absa group ABGJ.J , Firstrand Ltd FSRJ.J and Nedbank Group Ltd NEDJ.J . banks index .JBANK climbed 2.51 percent, hitting an 8-1/2-month high.
Standard Bank rose 3.69 percent to 194.94 rand, Absa gained 2.56 percent to 180 rand, Firstrand climbed 1.57 percent to 70.61 rand, while Nedbank was up 2.90 percent to 288.27 rand.
The Johannesburg All-share index .JALSH has been under pressure throughout the week due to concerns of a weaker global economic outlook and ongoing uncertainty over the U.S.-China trade war.
"That said, stronger performing Asian stock markets provided impetus to local equity prices," economists at NKC African Economics said.
The all-share index ended the week 0.77 percent stronger, while the top-40 index closed 0.88 percent firmer.
On the downside, food and beverage company AVI Ltd AVIJ.J was the biggest decliner, closing 8.68 percent after it reported a marginal rise in half-year group revenue, blaming continued pressure on consumer spending.
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