The government is likely to exempt foreign portfolio investors (FPIs) from an increase in taxes in this year's Budget approved by Parliament, officials were quoted as saying by news agency Reuters. This supported the domestic unit, say analysts.

Domestic stock markets registered a surge on Friday. The S&P BSE Sensex gained over 400 points at day's high and the broader NSE Nifty benchmark traded above 11,160.

According to analysts, the rupee may see some mean reversion ahead of the weekly close. "Price action could remain sideways until 71.05 gets taken out," forex advisory firm IFA Global said in a note.

"Next week is a truncated one and trading activity is likely to be light," it said. Forex markets will remain shut on August 15 on account of Independence Day.

Foreign institutional investors (FIIs) remained net sellers in the capital markets, pulling out Rs 437.39 crore on Thursday, according to provisional exchange data.

Brent crude futures, the global oil benchmark, fell 0.26 per cent to trade at $57.23 per barrel.

The dollar index, which gauges the greenback's strength against a basket of six currencies, fell 0.06 per cent to 97.55.

The 10-year government bond yield was at 6.41 per cent in morning trade.

On Thursday, the RBI's Monetary Policy Committee (MPC) cut the repo rate - the key interest rate at which it lends short-term funds to commercial banks - by 35 basis points to a nine-year low of 5.40 per cent.