The rupee appreciated 12 paise to close at 84.29 against US dollar on Monday, supported by a firm trend in domestic equities amid improved investor risk appetite.
Forex traders said investor sentiment got a boost after the Israeli ambassador to Washington said the Hezbollah ceasefire deal could come "within days".
At the interbank foreign exchange, the rupee opened at 84.38 and touched an intra-day high of 84.25 against the greenback. The unit ended the session at 84.29 against the dollar, registering a rise of 10 paise over its previous close.
On Friday, the rupee recovered from its all-time low level and appreciated 9 paise to close at 84.41 against the US dollar.
"The US bonds are rallying on Trump appointing Scott Bessent as his Treasury Secretary. It is to be known that Bessent is a deficit hawk, so the possibility of a reduction in borrowing is weighing on the yields, in turn supporting the INR.
"In addition, geopolitical concerns are somewhat contained as Israel may reach a ceasefire deal with Hezbollah and there has not been any concerning developments in the ongoing Russia-Ukraine war either," Praveen Singh -- Associate VP, Fundamental Currencies and Commodities, Sharekhan by BNP Paribas, said.
The USD-INR pair may trade range-bound in the very short term. Support is at Rs 84.25, followed by Rs 84.07-84 region. Resistance is at Rs 84.52, Singh added.
Meanwhile, the dollar index, which gauges the greenback's strength against a basket of six currencies, was trading lower by 0.47 per cent at 107.05.
Brent crude, the global oil benchmark, fell 0.69 per cent to USD 74.65 per barrel in futures trade.
In the domestic equity market, the 30-share BSE Sensex jumped 992.74 points, or 1.25 per cent, to close at 80,109.85 points, while Nifty surged 314.65 points, or 1.32 per cent, to settle at 24,221.90 points.
"India Nifty was up 1.32 per cent but had fallen from its high after Euphoria from the ruling party win in Maharashtra elections started dying down. Nifty made a high of 24,351 before losing ground on profit booking by investors," Anil Kumar Bhansali, Head of Treasury and Executive Director, Finrex Treasury Advisors LLP, said.
Rupee gained on the above euphoria as also on inflows of USD 2.5 billion which came on account of MSCI rebalancing, he said.
Foreign Institutional Investors (FIIs) turned net buyers in the capital markets on Monday, purchasing shares worth Rs 9,947.55 crore, according to exchange data.
Meanwhile, India's forex reserves dropped by USD 17.761 billion to USD 657.892 billion for the week ended November 15, the RBI said on Friday.
In the previous reporting week ended November 8, the overall reserves dropped by USD 6.477 billion to USD 675.653 billion.
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