The Indian rupee on Thursday appreciated by 48 paise to close at 71.21 against the US dollar as investors cheered easing tensions between the US and Iran.
Besides, a strengthening domestic equity market supported the rupee, dealers said.
At the foreign bank exchange, the domestic unit opened strong at 71.44 per dollar as against the previous day's close of 71.70. During the day, it traded in the range of 71.52 and 71.17 to the US currency.
"Rupee traded in the range of 71.52-71.17 after a strong gap up opening on the back of positive cues from the US and Iran as both hinted at want to be away from war with each other.
"Overnight strong fall in crude prices gave rupee the strength and during the day it kept taking support near 71.60. The levels of 71.65-71.85 shall keep acting as a crucial barrier for USD/INR pair, whereas 71.45-71.25 as supports in coming sessions," said Jateen Trivedi, Senior Research Analyst (Commodity & Currency) at LKP Securities.
On the equities front, the BSE Sensex opened on a strong footing and maintained its momentum throughout the session. It finally closed at 41,452.35, up 634.61 points, or 1.55 per cent. Similarly, the broader NSE Nifty surged 190.55 points, or 1.58 per cent, to 12,215.90.
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Anxiety over potential US-Iran conflict eased on Wednesday after President Donald Trump indicated he would not retaliate against Iran's missile strikes on Iraqi bases housing American troops.
Meanwhile, crude benchmark Brent was trading 0.14 per cent higher at USD 65.53 per barrel.
The dollar index, which gauges the greenback's strength against a basket of six currencies, rose 0.12 per cent to 97.41.
Foreign investors pulled out Rs 431.11 crore from domestic equities on a net basis on Thursday, provisional data showed.
The 10-year government bond yield was at 6.53 per cent.
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