"The news of government lowering corporate tax has rejoiced the market, stocks rallied sharply with bank nifty posting its biggest single day gain in 10 years. This gave rupee a big boost and dollar/rupee spot dropped to 70.67," said Rahul Gupta, Currency Research Head, Emkay Global Financial Services Limited.

Finance Minister Nirmala Sitharaman announced a slew of measures on Friday to revive sagging investment in country's economy, including a cut in corporate taxes. Ms Sitharaman said that the effective corporate tax rate will be lowered to 25.2 per cent including all surcharges, and will be applicable on companies that aren't availing any incentives.

The government will bear a massive Rs. 1.45 lakh crore per year to support the move, and the new tax structure will take effect from April 1, 2019, Ms Sitharaman added.

Analysts opined that though the markets have reacted positively to the tax cut announcement, there are concerns over deteriorating fiscal situation, saying Rs 1.45 lakh crore revenue foregone through corporate tax break will add to the fiscal mess.

Hence, this may have negative impact on the rupee going ahead, they added.

The Sensex and Nifty benchmark indices each ended 5.32 per cent higher at 38,014.62 and 11,274.20 respectively, marking their highest closing levels recorded since July 22 and July 26 respectively. The 50-scrip index soared 677.10 points to touch 11,381.90 at the day's highest level, settling at 10,704.80 - up 569.4 points from the previous close.

The dollar index, which gauges the greenback's strength against a basket of six currencies, rose by 0.15 per cent to 98.42.

"Rupee expected to appreciate towards 70.70 a dollar in coming days," according to HDFC Securities.

Meanwhile, crude oil benchmark, Brent Futures on Friday was trading at $64.90 per barrel, higher by 0.78 per cent.