The rupee snapped its three-day losing streak and closed 18 paise higher at 72.91 (provisional) against the US dollar on Thursday, supported by positive domestic equities.
Market participants remained vigilant ahead of Reserve Bank of India (RBI) monetary policy meeting outcome scheduled to be announced on Friday, forex traders said.
At the interbank forex market, the local unit opened on a weak note at 73.17 against the greenback and witnessed an intra-day high of 72.90 and a low of 73.18.
It finally ended at 72.91, registering a rise of 18 paise over its previous closing. On Wednesday, the rupee had settled at 73.09 against the US dollar.
Meanwhile, the dollar index, which gauges the greenback's strength against a basket of six currencies, rose 0.03 per cent to 89.94.
Brent crude futures, the global oil benchmark, rose 0.17 per cent to USD 71.47 per barrel.
On the domestic equity market front, the BSE Sensex ended 382.95 points or 0.74 per cent higher at 52,232.43, while the broader NSE Nifty advanced 114.15 points or 0.73 per cent to 15,690.35.
Foreign institutional investors were net buyers in the capital market on Wednesday as they purchased shares worth Rs 921.10 crore, as per exchange data.
Meanwhile, with 1,34,154 fresh cases, India's COVID-19 tally has climbed to 2,84,41,986, while the daily positivity rate has further dropped to 6.21 per cent, the health ministry said on Thursday.