The Indian rupee rose to a two-month peak on Friday, boosted by likely strong dollar inflows into domestic equities even as most Asian currencies declined pressured by a rise U.S. bond yields.
The rupee rose 0.2% to close at 83.0975 against the U.S. dollar, its strongest closing level since March 19.
The local unit rose nearly 0.3% on-week, its biggest weekly gain in over five months.
India's benchmark equity indices BSE Sensex and Nifty 50 touched record highs on Friday but ended the day little changed.
"Bunched up" dollar inflows helped lift the rupee, a foreign exchange trader at a private bank said.
Foreign investors net bought $560 million worth of Indian stocks on Thursday, according to provisional stock exchange data. The inflows likely continued on Friday which boosted the rupee, traders said.
Indian debt and forex markets were shut on Thursday for a holiday.
The dollar index slipped 0.1% to 104.9 while Asian currencies were mostly weaker after strong U.S. economic data prompted investors to dial back expectations of Federal Reserve rate cuts this year.
Odds of the Fed keeping rates unchanged at its September meeting rose to 46% from 35% a week earlier, according to CME's FedWatch tool.
For the dollar-rupee pair, "83.01 is the immediate support and a fall below that may push it lower towards 82.86," said Dilip Parmar, a foreign exchange research analyst at HDFC Securities.
Investors will now keep an eye on remarks from Fed Governor Christopher Waller later in the day ahead of the closely-watched U.S. PCE inflation data next week, for cues on the U.S. central bank's policy trajectory.
