UPDATE 1-South Africa's rand firms on dollar retreat as Biden inches toward presidency

(Updates rand, bonds; adds stocks)

JOHANNESBURG, Nov 5 (Reuters) - South Africa's rand firmed on Thursday, remaining below the key technical level of 16.00 to the dollar breached in a rally driven by increasing indications that Joe Biden was moving closer to victory in a tight U.S. presidential election.

At 1505 GMT, the rand ZAR=D3 was 0.33% firmer at 15.7975 per dollar, after hitting a new eight-month best of 15.7575 earlier in the session.

Government bonds also firmed, with the yield on the benchmark 2030 paper ZAR2030= dropping 28 basis points to 8.98%.

Biden, a Democrat, edged closer to victory in the race for the White House on Thursday as election officials tallied votes in the handful of states that will determine the outcome.

Republican President Donald Trump alleged fraud without providing evidence, filed lawsuits and called for recounts in a race yet to be decided two days after polls closed. how the exit polls are indicating a win for Democrat challenger Joe Biden but a divided Congress, markets are pricing in the prospects of lower stimulus spending – something that continues to weaken the dollar," Lukman Otunuga, senior research analyst at FXTM, said in a note.

"This sentiment may offer further support to the rand."

Otunuga said that while the election remained a big deal, markets focus was also on the U.S. Federal Reserve policy decision on Thursday.

"Should the central bank sound dovish, this could end up weakening the dollar, consequently providing a tailwind to emerging market currencies like the rand," said Otunuga.

The Johannesburg Stock Exchange (JSE) recovered all of last week's losses to post a fourth consecutive day of rally with the all share index .JALSH closing up 2.76% at 55,137 points. The top 40 companies index .JTOPI was up 2.81% to close at 50,687 points.

"The blue wave has not materialised even with a Biden win," said Greg Davies, head of wealth at Cratos Capital, adding that a Republican-controlled U.S. Senate means it will not be easy for Biden to implement proposed tax measures which is boosting the markets.

The broad-based rally was largely led by technology and gold mining stocks. Index heavyweight Naspers Ltd NPNJn.J , which holds a more than 30% stake in Chinese internet giant Tencent 0700.HK via subsidiary Prosus NV PRX.AS , was up by almost 6% on the back of soaring Chinese technology stocks.

The gold mining index .JGLDX 4.53% as the price of safe haven gold soared.