At the interbank foreign exchange, the domestic unit opened at 83.40 and moved in the range of 83.34 and 83.44 against the greenback during the session.
The local unit finally settled at 83.43 (provisional) against the dollar, registering a rise of 3 paise from its previous close.
The rupee had settled 3 paise lower at 83.46 against the dollar on Thursday.
Anuj Choudhary, Research Analyst, Sharekhan by BNP Paribas, said the rupee gained on a weak US dollar and a decline in crude oil prices. However, weak domestic markets and FII outflows capped sharp gains.
The weak dollar was attributed to the US Federal Reserve's decision to keep the key interest rate unchanged for the sixth consecutive time, citing slower progress on the inflation front.
Choudhary further said the rupee is expected to trade with a slight negative bias on weak domestic markets and selling pressure from foreign investors. However, a weak tone and a soft US dollar may support the rupee at lower levels.
"Traders may remain cautious ahead of non-farm payrolls report and ISM services PMI data from the US today. Encouraging non-farm payrolls may support the dollar while dismal data may weigh on the greenback. USD-INR spot price is expected to trade in a range of Rs 83.20 to Rs 83.60," he added.
India's
The seasonally adjusted HSBC India Manufacturing Purchasing Managers' Index (PMI), however, recorded the second fastest improvement in operating conditions in three-and-a-half years supported by buoyant demand.
Meanwhile, the dollar index, which gauges the greenback's strength against a basket of six currencies, declined 0.10 per cent to 105.07.
Brent crude futures, the global oil benchmark, slipped 0.04 per cent to USD 83.64 per barrel.
On the domestic equity market front, Sensex tumbled 732.96 points, or 0.98 per cent, to settle at 73,878.15, and Nifty tanked 172.35 points, or 0.76 per cent, to close at 22,475.85.
Foreign institutional investors (FIIs) were net sellers in the capital markets on Thursday, as they sold shares worth Rs 964.47 crore on a net basis, according to exchange data.
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