MUMBAI: The rupee rose 24 paise to close at 85.48 (provisional) against the greenback on Friday on the back of strong FII inflows and firm domestic equity markets.
Lower level of American currency index also favoured the Indian currency though an uptrend in crude oil prices capped its gain, forex traders said.
Foreign institutional investors (FIIs) purchased equities worth Rs 12,594.38 crore on a net basis on Thursday, according to exchange data.
At the interbank foreign exchange, the rupee opened at 85.50 against the dollar and traded in the range of 85.43-85.65 before settling at 85.48 (provisional), up 24 paise from its previous close.
The local unit rose 36 paise to close at 85.72 against the US dollar on Thursday.
"FII inflows and falling dollar index allowed the rupee to move higher. The RBI is also buying the dips to liquidate its month-end positions," Anil Kumar Bhansali, Head of Treasury and Executive Director, Finrex Treasury Advisors LLP, said.
"The Trump tariff's date of July 9 is fast approaching and... market remains gripped with uncertainty. Therefore, there is a chance of rupee hitting 86 next week," he said.
The dollar index, which gauges the greenback's strength against a basket of six currencies, inched up 0.10 per cent to 97.24 after declining earlier in the day.
Brent crude, the global oil benchmark, went up 0.72 per cent to USD 68.22 per barrel in futures trade after declining in the previous session.
Meanwhile, in the domestic equity market, Sensex climbed 303.03 points to settle at 84,058.90, while Nifty rose 88.80 points to 25,637.80.