The rupee settled for the day 8 paise higher at 81.62 (provisional) against the American currency on Friday on broad dollar weakness and improved risk sentiments.

Forex traders said positive domestic equities and foreign fund inflows supported the local unit.

At the interbank foreign exchange market, the local unit opened at 81.69 and touched an intra-day high of 81.44 and a low of 81.71 against the greenback.

The local unit finally settled at 81.62, registering a rise of 8 paise over its previous close.

On Thursday, the rupee appreciated by 23 paise to close at 81.70 against the US dollar.

The Indian rupee appreciated on positive domestic equities and a weak US Dollar. Foreign fund inflows also supported Rupee, said Anuj Choudhary - Research Analyst at Sharekhan by BNP Paribas.

The US dollar declined on extended losses as the Federal Open Market Committee (FOMC) minutes showed that a majority of Federal Reserve policymakers agree that it would likely soon be appropriate to slow the pace of rate hike. This led to a surge in global markets and decline in safe haven appeal, Choudhary said.

"We expect the rupee to trade with a positive bias on weak dollar and improved risk sentiments amid expectations of a slower pace of rate hike by the Fed. However, month-end dollar demand from importers and concerns over rising COVID-19 cases in China may cap sharp upside," Choudhary added.

Meanwhile, the dollar index, which gauges the greenback's strength against a basket of six currencies, was 0.11 per cent lower at 105.96.

Global oil benchmark Brent crude futures climbed 1.70 per cent to USD 86.79 per barrel.

On the domestic equity market front, the 30-share BSE Sensex rose 20.96 points or 0.03 per cent to end at 62,293.64, while the broader NSE Nifty gained 28.65 points or 0.15 per cent to 18,512.75.

Foreign Institutional Investors (FIIs) turned net buyers in the capital markets on Thursday as they purchased shares worth Rs 1,231.98 crore, according to exchange data.