The rupee appreciated by 19 paise to end at 72.80 (provisional) against the US dollar on Monday, buoyed by persistent fund inflows into the capital markets.
Besides, softening crude oil prices also strengthened domestic forex market sentiment.
However, a stronger dollar overseas against key rivals capped the rupee's gain, according to forex traders.
At the interbank forex market, the local unit opened at 72.85 against the greenback and witnessed an intra-day high of 72.74 and a low of 72.88.
It finally ended at 72.80 against the American currency, a rise of 19 paise over its previous close.
On Friday, the rupee had settled at 72.99 against the US dollar.
On the domestic equity market front, the BSE Sensex ended 228.46 points or 0.44 per cent higher at 52,328.51, while the broader NSE Nifty advanced 81.40 points or 0.52 per cent to 15,751.65.
Meanwhile, the dollar index, which gauges the greenback's strength against a basket of six currencies, rose 0.04 per cent to 90.17.
Brent crude futures, the global oil benchmark, fell 0.63 per cent to $71.44 per barrel.
Foreign institutional investors were net buyers in the capital market on Friday as they purchased shares worth Rs 1,499.37 crore, according to exchange data.
India reported 1,00,636 fresh Covid-19 cases, the lowest in 61 days, taking the infection tally to 2,89,09,975, while the number of active cases dropped to 14,01,609, according to the Health Ministry's data updated on Monday.