The rupee gained 7 paise to settle at 83.06 (provisional) against the US dollar on Friday, tracking robust buying in domestic equity markets and weak American currency overseas.
However, strengthening crude oil prices and foreign capital outflows capped the sharp gain in the domestic currency, forex traders said.
At the interbank foreign exchange, the domestic currency opened at 83.15 and traded between the peak of 83.06 and the lowest level of 83.16 against the greenback.
The local unit finally settled at 83.06 (provisional) against the dollar, registering a gain of 7 paise against its previous close.
On Thursday, the rupee settled 1 paisa higher at 83.13 against the US dollar.
The rupee appreciated following a positive trend in domestic markets and softness in the US dollar, Anuj Choudhary Research Analyst, Sharekhan by BNP Paribas, said.
"However, recovery in crude oil prices and FII outflows over the past couple of sessions capped sharp gains." He said the rupee is likely to trade with a slight positive bias on positive global equities and a weak US dollar.
"USD-INR spot price is expected to trade in a range of Rs 82.80 to Rs 83.50," Choudhary added.
Meanwhile, the dollar index, which gauges the greenback's strength against a basket of six currencies, was trading 0.17 per cent lower at 103.13 on Friday.
Analysts attributed the lower dollar index to the US macroeconomic data, which showed steady growth in the world's largest economy, dashing financial markets' hope of an immediate interest rate cut by the Federal Reserve.
Brent crude futures, the global oil benchmark, rose 0.68 per cent to USD 79.64 per barrel.
On the domestic equity market front, Sensex surged 496.37 points, or 0.70 per cent, to settle at 71,683.23 points. The Nifty climbed 160.15 points or 0.75 per cent to 21,622.40 points.
FIIs were net sellers in the equity market on Thursday as they sold shares worth Rs 9,901.56 crore, according to exchange data.
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