"Rupee has appreciated nearly 1 per cent in two days. The hopes of US-China closing the phase-one trade deal along with the announcement Brexit deal, has kept all emerging market currencies including rupee, afloat," said Rahul Gupta, Head of Currency, Emkay Global Financial Services.

Global markets rallied after Britain and the European Union said they have struck an outline Brexit deal following prolonged negotiations.

The deal, however, must still be formally approved by the bloc and ratified by the European and UK parliaments.

Weak US economic data, a fall in dollar overseas and speculation over a rate cut by the US central bank also supported the rupee, Mr Gupta said. The rupee can appreciate further if the Brexit deal gets parliamentary approval, he added.

Foreign institutional investors (FIIs) remained net buyers in the capital markets, infusing Rs 1,158.63 crore on Thursday, exchange data showed.

The dollar index, which gauges the greenback's strength against a basket of six currencies, slipped 0.31 per cent to 97.69.

Domestic stock markets registered sharp gains on Thursday backed by strength in the banking sector. Benchmark indices S&P BSE Sensex and NSE Nifty gained over 1 per cent to close at their highest levels recorded in three weeks.

Crude oil prices fell in anticipation of higher supply going forward. Brent futures - the global benchmark for crude oil - was last seen trading 0.50 per cent lower at $59.12 per barrel.

The rupee is expected to move in a range of 70.80-71.80 over the next few sessions and global cues will be monitored closely for cues going forward, said Amit Pabari, Managing Director, CR Forex Advisors.