The rupee appreciated by 18 paise to settle at 75.54 against the US dollar on Friday, tracking higher domestic equities and weakness in the American currency.
Forex traders said positive cues from domestic equities and significant foreign fund inflows supported the local unit.
At the interbank foreign exchange, the rupee opened higher at 75.36 but pared some initial gains to close at 75.54 against the US dollar, registering a rise of 18 paise over its previous close.
Forex market was closed on Thursday on account of Buddha Purnima.
Foreign institutional investors were net buyers in the capital market, as they bought equity shares worth Rs 19,056.49 crore on Thursday, according to provisional exchange data.
Meanwhile, the dollar index, which gauges the greenback's strength against a basket of six currencies, was trading 0.05 per cent down at 99.84.
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"Indian rupee opened on a strong note tracking overnight losses in the dollar index and gains in Asian currencies, buoyed by the positive trade dialogue between the US and China. However, the rupee retreated due to shaky sentiments in the market ahead of key jobs report from the US," said Sugandha Sachdeva, VP-Metals, Energy & Currency Research, Religare Broking.
Going ahead, the domestic currency will take further cues from the developments about the COVID-19 crisis, as well the key US data where expectations point towards staggering job losses of around 22 million, Sachdeva said.
According to Gaurang Somaiyaa, Forex & Bullion Analyst, Motilal Oswal Financial Services, "on the domestic front, the focus will be inflation and industrial production number that is expected to disappoint and thereby keep the currency under pressure. For the next couple of sessions, we expect the rupee (Spot) to quote in the range of 75.20 and 76.20."