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The rupee appreciated by 62 paise to close at 80.78 (provisional) against the US dollar on Friday, as moderating US CPI data coupled with a fall in the dollar index boosted investor sentiments.
Forex traders said positive domestic equities and sustained foreign fund inflows also supported the local unit.
At the interbank foreign exchange market, the local unit opened at 80.76 and touched an intra-day high of 80.58 and a low of 80.99 against the greenback.
The local unit finally settled at 80.78, registering a rise of 62 paise over its previous close of 81.40.
"The Indian rupee appreciated on weak US Dollar and positive domestic markets. Sustained FII inflows also supported Rupee," said Anuj Choudhary - Research Analyst at Sharekhan by BNP Paribas.
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US inflation and core inflation declined to 7.7 per cent and 6.3 per cent in October from 8.2 per cent and 6.6 per cent in September, respectively, amid hopes that inflation may have peaked and Fed will not raise rates aggressively, Choudhary said.
"We expect Rupee to trade with a positive bias on rise in risk appetite in global markets and weakness in the greenback," Choudhary said.
Traders are expected to remain cautious ahead of industrial production data from India and consumer sentiment data from the US on Friday, he added.
Meanwhile, the dollar index, which gauges the greenback's strength against a basket of six currencies, slipped 0.82 per cent to 107.31.
Global oil benchmark Brent crude futures surged 2.56 per cent to $96.07 per barrel.
On the domestic equity market front, the 30-share BSE Sensex advanced 1,181.34 points or 1.95 per cent to end at 61,795.04, while the broader NSE Nifty gained 321.50 points or 1.78 per cent to 18,349.70.
Foreign Institutional Investors (FIIs) were net buyers in the capital markets on Thursday as they purchased shares worth ₹36.06 crore, according to exchange data.
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