It is the rupee's biggest single-day gain this year.
The rupee continued its relentless rally against the US dollar to end at 1-1/2 month high of 67.47 on the back of frantic dollar unwinding by banks and exporters amid hopes of Fed hike delay.
Posting its biggest single-day gain this year, the home currency settled the day with a solid 40 paise gain.
This is the sixth consecutive session of rise.
Forex market sentiment turned highly buoyant after finance minister Arun Jaitley announced a fiscal deficit target that was in line with estimates along with proposal to further liberalise FDI policy.
Balancing between the need for stimulating growth and continuing fiscal discipline, the finance minister said the government will target to bring down the fiscal deficit to 3.2 per cent of the GDP in the fiscal 2017-18.
Revenue deficit will be reduced to 2.1 per cent for 2017-18 from 2.3 per cent in the ongoing fiscal, he said.
Cheering Budget proposals and clarity on FPI taxation steered the domestic equity markets to multi-month highs.
Volatile dollar movements ahead of the FOMC rate decision later in the day against the backdrop of economic and trade policy changes by the new President further supported the rupee trade, a forex dealer commented.
As the world's fastest-growing economy continues to reel in the aftermath of last year's demonetisation drive, strong policy measures to revive both growth cycle and investor sentiment will further strengthen the rupee in coming days, he added.
Meanwhile, Nikkei Markit India Manufacturing Purchasing Managers' Index (PMI) -- an indicator of manufacturing activity -- increased to 50.4 in January from 49.6 in
December, a private manufacturing survey showed business is slowly returning to normal from demonetisation downturn in January amid rising order books.
However, foreign funds turned net sellers after recent buying spree and sold shares worth a net Rs 532.88 crore.
The home currency resumed on firm footing at 67.62 as compared to Thursday's closing value of 67.87 at the Interbank Foreign Exchange (forex) market on continued dollar selling.
Maintaining its strong showing, the local unit finally settled at the day's highest level of 67.47, showing a smart 40 paise, or 0.59 per cent jump - the level not seen since December 14, 2016 when it had closed at 67.43.
In worldwide trade, the dollar traded little changed against major counterparts amid concerns over the protectionist measures that the Trump administration is planning and Fed's policy statements.
The US dollar index was trading marginally up at 99.55 in late afternoon session.
The RBI fixed the reference rate for the dollar at 67.6458 and for the euro at 72.9154.
However, in cross-currency trade, the Indian unit retreated sharply against the British pound after recent spectacular upmove and ended at 85.19 from 84.36 and also dropped further against the euro to finish at 72.83 from 72.67 earlier.
But, it recovered against the Japanese Yen to close at 59.56 per 100 yens from 59.60 earlier yesterday.
In the forward market, premium for dollar displayed a sluggish trend due to fresh receivings from exporters.
The benchmark six-month premium for July settled lower at 155-157 paise from 158-160 paise and the far-forward January 2018 contract also dropped to 272-274 paise from 276-278 paise on Tuesday.
Crude prices dipped marginally, largely weighed down by ongoing high supplies despite an OPEC-led production cut.
