The rupee surged 61 paise against the greenback to settle at 86.07 (provisional) on Friday due to a sharp correction in the US dollar and a strong rebound in the domestic equity markets.
The surge in the local unit came a day after US President Donald Trump suspended the 26 per cent tariffs on India till July 9.
At the interbank foreign exchange, the domestic unit opened at 86.22, up 46 paise against the US dollar. During the intra-day trade, it rose to 85.95 before settling at 86.07 (provisional), up 61 paise against the greenback.
The rupee had settled at 86.68 on Wednesday.
Equity, forex, and commodity markets were closed on Thursday on account of Shri Mahavir Jayanti.
"The rupee opened at 86.22 but the dollar was immediately sold off as the dollar index fell below 100 levels for the first time in three years," Anil Kumar Bhansali, Head of Treasury and Executive Director, Finrex Treasury Advisors LLP, said.
"The rupee is expected to be in the range of 85.75-86.25 next week on Tuesday after the holiday on Monday," he said.
Meanwhile, the dollar index, which gauges the greenback's strength against a basket of six currencies, crashed 1.52 per cent to 99.335.
"With China imposing a 125 per cent tariff on US exports, the trade war continues but the dollar has been falling against Asian and European (currencies)," Bhansali said.
In the domestic equity market, the 30-share BSE Sensex jumped 1,310.11 points to settle at 75,157.26, while the Nifty rose 429.40 points to 22,828.55.
Brent crude, the global oil benchmark, rose marginally by 0.08 per cent to USD 63.38 per barrel in futures trade.
Foreign institutional investors (FIIs) offloaded equities worth Rs 4,358.02 crore on a net basis on Wednesday, according to exchange data.