The Indian rupee broke a three-day losing streak on Friday, appreciating by 50 paise to settle at Rs 85.45 against the US dollar, buoyed by a sharp decline in the dollar index and strong performance in domestic equities.A rise in global risk appetite also supported the local currency, despite lingering pressure from crude oil prices and foreign fund outflows.The rupee, which had dropped 53 paise over the previous three sessions, witnessed heavy volatility in the interbank foreign exchange market. It opened at Rs 85.95 and swung between an intraday high of Rs 85.11 and a low of Rs 86.10, before settling at 85.45—marking a significant recovery from Thursday’s close of Rs 85.95.Forex analysts attributed the rebound primarily to a broad-based weakness in the greenback. “We expect the rupee to trade with a positive bias on underlying weakness in the US dollar index and improved global risk sentiments. However, selling pressure from foreign investors may cap sharp upside movement,” said Anuj Choudhary, Research Analyst at Mirae Asset Sharekhan as quoted by PTI.He added that traders would closely monitor upcoming US existing home sales data, noting that the USD-INR spot rate could fluctuate within the 85 to 85.70 range.The dollar index, which measures the strength of the greenback against a basket of six major currencies, fell by 0.60% to 99.36. The drop was linked to a resurgence in demand for riskier currencies and declining US Treasury yields.Dilip Parmar, Senior Research Analyst at HDFC Securities, noted that the rupee posted its largest single-day gain since November 11, 2022. “This upward movement was primarily fuelled by a weaker US dollar and a strong performance in the domestic equity market. Additionally, the central bank’s efforts to encourage foreign investment in corporate bonds, providing short-duration liquidity, further bolstered the rupee’s appreciation,” he said.Parmar projected that the USD-INR spot may find support at 84.94 and face resistance around 86.15.On the commodities front, Brent crude futures fell 0.22% to $64.30 per barrel.Equity markets mirrored the upbeat sentiment, with the benchmark BSE Sensex rallying 769.09 points or 0.95% to end at 81,721.08. The NSE Nifty also gained 243.45 points or 0.99% to settle at 24,853.15.Foreign institutional investors (FIIs) were net buyers, purchasing equities worth Rs 1,794.59 crore on Friday, according to exchange data.Separately, the Reserve Bank of India reported that the country’s forex reserves fell by $4.888 billion to $685.729 billion for the week ended May 16.