The rupee's closing on Friday was the highest in eight months, and it hit an intra-day high of 59.68, bringing relief for the government battling to contain prices and push the economy out of a slowdown.
A stronger rupee will make most imported goods such as crude oil cheaper raising hopes of a cut in transport fuel, particularly of petrol where retail prices are already aligned with global crude prices.
The rupee's rise against the dollar will aid the government's and the Reserve Bank of India's (RBI's) efforts to cool prices.
However, a strong rupee also hurts exports as it makes Indian goods pricier in dollar terms compared to other competitors.
Forex traders told HT that the RBI, which is widely speculated to maintain a status quo on interest rates next Tuesday, has likely bought $3 billion this week to prevent a further rise in the domestic currency's value.
Equities scaled new peaks on sustained buying by foreign institutional investors (FIIs).
The 30-share BSE Sensex gained by 125.60 points or 0.57% to close at 22,339.97 points, and the NSE Nifty gained 54.15 points or 0.82% to close at 6,695.90 points, after briefly crossing 6,700 for the first time ever.