The rupee climbed 5 paise to close at 81.66 (provisional) against the US dollar on Monday as lower crude prices in and a firm trend in domestic equities boosted investor sentiment.
Besides, a weak American currency and foreign fund inflows also supported the domestic unit, forex traders said.
At the interbank foreign exchange market, the local unit opened weak at 81.81 and touched an intra-day high of 81.61 and a low of 81.83 against the greenback.
The local unit finally settled at 81.66, registering a rise of 5 paise over its previous close of 81.71.
Meanwhile, the dollar index, which gauges the greenback's strength against a basket of six currencies, slipped 0.35 per cent to 105.59.
Global oil benchmark Brent crude futures declined 3.10 per cent to USD 81.04 per barrel.
On the domestic equity market front, the 30-share BSE Sensex advanced 211.16 points or 0.34 per cent to end at a fresh closing peak of 62,504.80, while the broader NSE Nifty gained 50 points or 0.27 per cent to record 18,562.75.
Foreign Institutional Investors (FIIs) were net buyers in the capital markets on Friday as they bought shares worth Rs 369.08 crore, according to exchange data.
Foreign portfolio investors have rediscovered their liking for Indian equities, making a net investment of Rs 31,630 crore in November in hopes of an end to the aggressive rate hikes and positivity about overall macroeconomic trends.