The rupee gained 29 paise to settle at 79.45 (provisional) against the US dollar on Wednesday as heavy buying in domestic equities and persistent foreign capital inflows strengthened investor sentiment.
Besides, softening crude oil prices and easing inflationary pressures supported the domestic unit, forex traders said.
At the interbank forex market, the local unit opened strong at 79.32 against the greenback and witnessed an intra-day high of 79.26 and a low of 79.48.
It finally ended at 79.45 against the American currency, registering a rise of 29 paise over its previous close of 79.74.
The dollar index, which gauges the greenback's strength against a basket of six currencies, rose 0.06 per cent to 79.74.
On the domestic equity market front, the BSE Sensex ended 417.92 points or 0.70 per cent higher at 60,260.13, while the broader NSE Nifty advanced 119 points or 0.67 per cent to 17,944.25.
Brent crude futures, the global oil benchmark, slipped 0.06 per cent to $92.28 per barrel.
Foreign institutional investors remained net buyers in the capital market on Tuesday as they purchased shares worth ₹1,376.84 crore, as per exchange data.
After turning net buyers last month, foreign investors have continued to invest in Indian equities and pumped in ₹22,452 crore in the first two weeks of August.