MUMBAI - The Indian rupee firmed to a more than three-week high by Friday afternoon as the U.S. dollar remained under pressure on bets the Federal Reserve would decelerate its pace of rate hikes after the U.S. economy unexpectedly shrunk in the June quarter.

The partially convertible rupee was trading at 79.24 per dollar by 0837 GMT, its strongest level since July 7 and higher versus its close of 79.7550 on Thursday.

The greenback shed around 1% against the yen, taking the dollar index - which measures the currency against six majors - down by 0.4% and marking its worst performance since early July.

Traders now shift their focus to the Reserve Bank of India's monetary policy meeting next week, where chances of a 35 basis point (bp) hike seem more likely than a 50 bp hike.

(Reporting by Anushka Trivedi)