The Forex market was closed on Wednesday due to a holiday declared by the Maharashtra government.
The rupee stayed on the upward track for a record seventh straight session and settled 10 paise higher at 83.55 (provisional) against the dollar on Friday, as robust domestic equity markets and retreating crude oil prices boosted investors' sentiment.
Forex traders said a weak greenback against Asian peers supported the Indian currency. They attributed the lower dollar index to investors' shifting focus towards emerging market currencies after the US Federal Reserve reduced benchmark interest rate by 0.50 per cent.
At the interbank foreign exchange market, the Indian currency opened at 83.63 and hit the intra-day high of 83.48 against the greenback. The unit touched the day's low of 83.63 before settling at 83.55 (provisional) against the dollar, registering a gain of 10 paise from its previous close.
The local unit gained 11 paise to settle at 83.65 against the US dollar on Thursday. On Tuesday, it had appreciated 10 paise.
The Forex market was closed on Wednesday due to a holiday declared by the Maharashtra government.
The Indian currency has been on a recovery path since September 11 when it had settled at 83.99 against the American currency, a tad higher than the lowest level of 84.09 recorded on August 5.
The rupee has gained 44 paise in the past seven consecutive sessions since September 12.
Anuj Choudhary, Research Analyst at Sharekhan by BNP Paribas, said the rupee traded at the highest levels in more than two months on Friday as domestic equities touched fresh all-time high for the second straight session and the US dollar showed weakness.
Going ahead, the rupee is expected to trade with a positive bias on positive domestic markets and anticipation of fresh foreign inflows amid 50-basis points rate cut by the Fed, Choudhary said, adding, "Traders may take cues from speeches by Federal Open Market Committee (FOMC) members. USD-INR spot price is expected to trade in a range of Rs 83.35 to Rs 83.70".
Meanwhile, the dollar index, which gauges the greenback's strength against a basket of six currencies, was up marginally by 0.18 per cent to 100.50.
Brent crude, the international benchmark, declined 0.47 per cent to USD 74.53 per barrel in futures trade.
In the domestic equity market, the 30-share BSE Sensex surged 1,359.51 points, or 1.63 per cent, to settle at its highest-ever closing level of 84,544.31, while the Nifty soared 375.15 points, or 1.48 per cent, to hit its fresh peak of 25,790.95.
Foreign Institutional Investors (FIIs) were net sellers in the capital markets on Thursday, as they offloaded sha