The rupee appreciated by 6 paise to close at 73.49 (provisional) against the US dollar on Monday, tracking weakness in the American currency and positive domestic equities.
The sustained foreign fund inflows also supported the rupee, traders said.
At the interbank forex market, the domestic unit opened at 73.52 against the US dollar and witnessed an intra-day high of 73.47 and a low of 73.61.
The local unit finally settled at 73.49 against the American currency, registering a rise of 6 paise over its previous close.
On Thursday, the rupee had settled at 73.55 against the US dollar.
Forex and equity markets were closed on Friday for Christmas.
Meanwhile, the dollar index, which gauges the greenback's strength against a basket of six currencies, slipped 0.25 per cent to 89.99.
On the domestic equity market front, BSE Sensex ended 380.21 points or 0.81 per cent higher at 47,353.75, while the broader NSE Nifty jumped 123.95 points or 0.9 per cent to 13,873.20.
"Indian Rupee appreciated on weakness in Dollar and surge in stock markets. Market sentiments improved as US President Donald Trump signed USD 2.3 trillion coronavirus relief aid and spending package and as the UK and European Union secured trade agreement," Saif Mukadam, Research Analyst, Sharekhan by BNP Paribas, said.
However, the sharp gain was prevented amid worries over rising coronavirus cases across the globe and emergence of a new strain of COVID-19 in the UK, Mukadam added.
Traders fear that strict restrictions on social and business activity would hamper global economic recovery.
Foreign institutional investors were net buyers in the capital market as they purchased shares worth Rs 1,225.69 crore on a net basis on Thursday, according to provisional exchange data.
Brent crude futures, the global oil benchmark, rose 1.31 per cent to USD 51.96 per barrel.
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