The rupee advanced by 9 paise to settle at 73.55 (provisional) against the US dollar on Monday, buoyed by sustained foreign fund inflows and heavy buying in domestic equities.
Traders said upbeat industrial production data and weakening of the American currency in the overseas market also supported the rupee.
At the interbank forex market, the domestic unit opened at 73.62 against the US dollar, then gained ground and touched an intra-day high of 73.48 against the greenback. The local unit finally closed at 73.55 against the American currency, registering a rise of 9 paise over its previous close.
On Friday, the rupee ended almost flat at 73.64, up 2 paise, against the US dollar.
Meanwhile, the dollar index, which gauges the greenback’s strength against a basket of six currencies, was trading down 0.45 per cent at 90.56.
"Indian rupee advanced on weakness in dollar and as market sentiments improve on hopes of global economic recovery buoyed by positive development in Covid-19 vaccine and ongoing efforts to pass more fiscal stimulus in the US," said Saif Mukadam, Research Analyst, Sharekhan by BNP Paribas.
However, sharp gains were prevented on surge in crude oil prices and as traders remained cautious ahead of CPI inflation data.
"India CPI data is likely to show that Inflation remained above the Reserve Bank of India medium-term target range of 2-6 per cent. Rupee may trade in a range of 73.00 to 74.0 in next couple of sessions," Mukadam noted.
Foreign institutional investors were net buyers in the capital market as they purchased shares worth Rs 4,195.43 crore on a net basis on Friday, according to exchange data.
On the domestic equity market front, the BSE Sensex ended 154.45 points or 0.34 per cent higher at 46,253.46, while the broader NSE Nifty jumped 44.30 points or 0.33 per cent to 13,558.15.
Brent crude futures, the global oil benchmark, rose 1.04 per cent to USD 50.49 per barrel.