The rupee appreciated by 8 paise to close at the 81.22 provisional against the US dollar on Thursday after Federal Reserve Chairman said the pace of interest rate hikes may slow.
Foreign fund inflows and a rally in domestic equities boosted investor sentiments, according to traders.
The local currency opened at 81.08 and touched an intra-day high of 80.98 and a low of 81.32 against the dollar at the interbank foreign exchange market.
The local unit was finally settled at 81.22, registering an increase of 8 paise over its previous close.
On Wednesday, the rupee closed at 81.30 against the US dollar, on month-end exporter dollar selling and MSCI rebalancing related inflows.
The Indian rupee started the new month on a front foot following stronger Asian currencies and risk-on sentiments.
It has gained three out of the last four days as the dollar index fell to a three-month low after Fed Chair confirmed the pace of interest rates set to slow along with China easing the COVID restrictions, said Dilip Parmar, Research Analyst, HDFC Securities.
Parmar said that the support of spotUSDINR has been reached at 80.72, the 100 days simple moving average and resistance at 81.91, the recent swing high formed on November 21. The bias remains bearish for the pair as long as it trades below 82.10.
The dollar index, which measures the strength of the dollar against a basket of six currencies, fell 0.41 per cent to 105.51.
Brent crude futures fell by 0.10 per cent to USD 86.88 per barrel.
On the domestic equity market front, the 30-share BSE Sensex gained 184.54 points or 0.29 per cent to end at 63,284. The NSE Nifty gained 54.15 points or 0.29 per cent to 18,812. Foreign Institutional Investors FIIs were net buyers in the capital markets on Wednesday as they purchased shares worth Rs 9,010. According to exchange data, 41 crore were reported to be in possession of.