In a major relief to energy importers like India, oil prices slipped below the USD 60 per dollar mark as investors fretted over a supply glut.
Forex dealers said a bullish trend in the equity market and a weak greenback further propped up the local unit, which racked up gains for the third straight day.
The dollar weakened against some currencies overseas after US Federal Reserve Chairman Jerome Powell said that the central bank's benchmark interest rate is likely near a "neutral level".
At the Interbank Foreign Exchange (forex), the rupee opened on a firm footing at 70.15 against the US dollar. It then breached the crucial 70 per USD mark and rallied to the day's high of 69.78 following dollar selling by exporters.
The local unit finally finished at 69.85, showing a gain of 77 paise over its previous close.
The last time the rupee closed below 70 was on August 24, when it had finished at 69.91.
"The rupee remains firm on account of sharp decline in the crude oil prices in the international market. This is positive for India as decline in crude oil prices may push inflation and current account deficit lower," said Rushabh Maru – Research Analyst , Anand Rathi Shares and Stock Brokers.
He added that there is lot of uncertainty in the global financial markets and domestic equities are quite volatile too, hence we may see importers rushing to cover their exposure for 2-3 months.
"Near term range for the rupee is 69.50 to 71.00 levels," he said.
Sunil Sharma, Chief Investment Officer, Sanctum Wealth Management, said, "The INR appreciated on account of renewed interest by FIIs in India. After a steep 15 per cent fall in the Rupee earlier this year, the Rupee has bounced back 6 per cent. After pulling out USD 5 billion cumulatively in September and October, FIIs have bought Indian equities worth USD 558 million in November."
Globally, Brent crude, the international benchmark, was trading 1.04 per cent down at USD 58.15 per barrel.
The 30-share Sensex surged 453.46 points, or 1.27 per cent, to end at 36,170.41, while the broader NSE Nifty jumped 129.85 points, or 1.21 per cent, to 10,858.70.
Meanwhile, on net basis, foreign funds bought shares worth Rs 823.47 crore, while DIIs purchased share to the tune of Rs 973.31 crore Thursday, provisional data showed.
The Financial Benchmark India Private Ltd (FBIL) set the reference rate for the rupee/dollar at 69.9159 and for rupee/euro at 79.5801. The reference rate for rupee/British pound was fixed at 89.7389 and for rupee/100 Japanese yen at 61.71.