The rupee strengthened by 8 paise to close at 73.16 (provisional) against the US dollar on Friday after the Reserve Bank of India decided to keep benchmark interest rate unchanged.

Reserve Bank of India on Friday kept repo rate unchanged at 4 per cent but maintained an accommodative stance, implying more rate cuts in the future if the need arises to support the economy hit by the COVID-19 crisis.

At the interbank forex market, the rupee opened at 73.21 against the American currency, then gained ground and finally settled at 73.16 against the US dollar, up 8 paise from its previous close of 73.24.

During the session, the local unit witnessed an intra-day high of 73.02 and a low of 73.26 against the greenback.

In light of the RBI monetary policy and also the usual Friday Gsec auction, trading hours were extended for both forex as well as bond markets.

"The Monetary Policy Committee (MPC) kept policy rates unchanged and kept the stance as accommodative as was expected. The communication, however, was extremely dovish. The MPC overlooked current elevated inflation prints, viewing them as transient," said Abhishek Goenka, Founder and CEO, IFA Global.

Goenka further said "the rupee had appreciated and forwards had got received but nationalised banks stepped in at lower levels to support USD-INR".

This is the third consecutive session of gain for the rupee.

Meanwhile, the dollar index, which gauges the greenback''s strength against a basket of six currencies, fell 0.28 per cent to 93.34.

On the domestic equity market front, the 30-share BSE index ended 326.82 points or 0.81 per cent higher at 40,509.49, while the broader NSE Nifty rose by 79.60 points or 0.67 per cent to 11,914.20.

Foreign institutional investors were net buyers in the capital market as they purchased shares worth Rs 978.37 crore on Thursday, according to exchange data.

Brent crude futures, the global oil benchmark, fell 0.95 per cent to USD 42.93 per barrel.