Mumbai: The rupee continued its winning streak Wednesday as the dollar weakened ahead of the expected rate cut by the US Federal Reserve. India-US trade deal talks also boosted the local unit, dealers said. The unit advanced above the 88-mark for the first time in almost three weeks. On Wednesday, the rupee gained 24 paise, its biggest intra-day gains in nearly a month, closing at 87.8150 per dollar.

The rupee’s previous close was 88.0525. It hit a record low of 88.4425 per dollar last week. The notable strengthening of the Indian rupee is largely a reflection of a more positive outlook on US-India trade relations and the ongoing ‘long unwinding’ in the USD-INR, a trend supported by the greenback’s weakness and a favourable valuation based on real effective exchange rate or REER, said Dilip Parmar, senior research analyst, HDFC Securities. Traders have started closing their bets on the dollar rising against the Indian rupee, influenced by the dollar’s overall weakness against major currencies and hopes for progress in India-US trade talks.

The markets have priced in a 25-basis point rate cut by the Federal Open Market Committee at the conclusion of its two day meet on Wednesday. The decision will be detailed post India market hours.

But focus will be on the comments by US Fed Chair Jerome Powell and the updated “dot-plot”, a key tool to gauge the Fed’s likely monetary policy path. Bank treasury officials and currency dealers said that the rupee’s negative bias has eased but gains may be capped near 87.50 levels because of demand for dollars from importers for hedging. However, they remain cautious as any hawkish signals by the Fed or trade setbacks could limit appreciation and increase volatility.