At the interbank foreign exchange market, the local unit opened at 83.92 and touched an intra-day high of 83.84 against the US dollar.
The domestic currency finally settled at 83.89, higher by 8 paise from its previous close.
"The Indian Rupee gained seven paise today as domestic markets touched fresh record highs and expectations of fresh FII inflows. A weak tone in crude oil prices also favoured the Rupee. However, positive US Dollar capped sharp gains. US Dollar gained on month-end flows," Anuj Choudhary, Research Analyst at Sharekhan by BNP Paribas, said.
On Wednesday, the rupee depreciated 4 paise to close at 83.97 against the American currency.
According to Jateen Trivedi, VP Research Analyst, Commodity and Currency, LKP Securities, the rupee gained as expectations of interest rate cuts continue to provide support, preventing the rupee from falling below 84.
"The strong demand around 84 keeps the rupee buoyant, with resistance seen at 83.75. The rupee is expected to trade in a positive range between 84-83.70," Trivedi said.
Meanwhile, the dollar index, which gauges the greenback's strength against a basket of six currencies, was trading 0.11 per cent higher at 101.20.
Brent crude, the global oil benchmark, declined 0.34 per cent to USD 78.38 per barrel.
On the domestic equity market front, Sensex rose 349.05 points, or 0.43 per cent, to close at 82,134.61 points. The Nifty closed 99.60 points, or 0.4 per cent, up at 25,151.95 points.
Foreign institutional investors (FIIs) turned net buyers in the capital markets on Thursday, as they bought shares worth INR 3,259.56 crore, according to exchange data.
"We expect the rupee to trade with a slight negative bias on recovery in the US dollar and month end dollar demand from OMCs and importers. However, rise in global risk sentiments and fresh FII inflows may support the rupee at lower levels," Choudhary added.
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