The rupee appreciated by 34 paise to close at 81.86 (provisional) against the US currency on Friday, supported by a rebound in domestic equities and easing crude oil prices.
At the interbank foreign exchange market, the local unit opened at 82.15 against the American currency and finally settled at 81.86 against the greenback, registering a gain of 34 paise over its previous close of 82.20.
During the trading session, the rupee also touched a low of 82.31 against the dollar.
The dollar index, which gauges the greenback's strength against a basket of six currencies, declined 0.12 per cent to 101.63.
Global oil benchmark Brent crude futures advanced 0.39 per cent to USD 82.49 per barrel.
"Indian Rupee appreciated on a rebound in domestic equities and weakness in crude oil prices. However, positive US Dollar capped sharp gains," said Anuj Choudhary - Research Analyst at Sharekhan by BNP Paribas.
Choudhary further noted that the rupee depreciated earlier today as PMI data was disappointing. India's services PMI fell to 57.2 in January from 58.5 in December while the composite PMI fell to 57.5 from 59.4 during the same period.
"We expect the Rupee to trade with a slight positive bias as a rebound in domestic equities may lead to fresh foreign inflows. Decline in crude oil prices and weak Dollar amid dovish Fed may support Rupee at lower levels," Choudhary said.
Market participants may remain cautious ahead of non-farm payrolls and ISM services PMI data from the US. While the payroll data is expected to show a slowdown in the pace of job additions, services PMI is expected to show the sector move to expansion territory, Choudhary added.
On the domestic equity market front, the 30-share BSE Sensex advanced 909.64 points or 1.52 per cent to end at 60,841.88, while the broader NSE Nifty rose 243.65 points or 1.38 per cent to 17,854.05.
Foreign Institutional Investors (FIIs) were net sellers in the capital market on Thursday as they offloaded shares worth Rs 3,065.35 crore, according to exchange data.
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