With crude oil prices constantly dipping, concerns over widening current account deficit have slightly eased, helping the rupee claw back some lost ground.
The reports have suggested that the Trump administration is considering granting waivers to India and some other countries, which will allow these nations to continue buying oil from Iran, despite the renewal of US sanctions from next week.
The US had told various countries, including India, to cut oil imports from the Persian Gulf nation to "zero" by November 4 or face sanctions.
"Broad-based weakness in dollar along with fall in crude oil prices boosted the Indian rupee, which climbed 1.40 per cent to 72.44. The local currency had a single biggest day gain in five years amid improvement in macro-environment. Foreign funds have turned buyer in domestic equity and debt market," an analyst said.
Brent crude, the international benchmark, was trading at $72.98 per barrel.
"Crude oil traded near seven-month lows pressured by higher output from major oil producers... Brent crude has corrected 17 per cent from its recent high of 86.74 registered on October 3," the analyst noted.
Meanwhile, foreign funds on a net basis bought shares worth Rs 348.75 crore from the capital markets Thursday, while domestic institutional investors sold shares worth Rs 509.17 crore, provisional data showed.
Market benchmark Sensex soared almost 580 points to end at a one-month high of 35,011.65 Friday. The NSE Nifty leaped 172.55 points, or 1.66 per cent, to 10,553.
The Financial Benchmark India Private Ltd (FBIL) set the reference rate for the rupee/dollar at 72.8798 and for rupee/euro at 83.2292. The reference rate for rupee/British pound was fixed at 94.7530 and for rupee/100 Japanese yen at 64.47.