The rupee opened sharply lower at 70.16 and fell further to touch over two-month low of 70.53 at the interbank foreign exchange market as oil prices rose over 1 per cent in global markets. The local unit finally settled at 70.51, down by 59 paise over its previous close.
However, the dollar's weakness against some currencies overseas and a higher opening of the domestic equity markets capped the rupee's losses, a forex dealer said. Fresh dollar demand from banks and importers weighed on the Indian currency, they added.
The 30-share index was trading 119.52 points, or 0.31 per cent, higher to 38,506.27. The index began the session on a firm note at 38,452.47 and hit the session's high of 38,526.71 on steady buying by foreign funds as well as retail investors.
The marginal 2.44 per cent increase in exports, as well as lower imports of gold and petroleum products in February, significantly narrowed the country's trade deficit to USD 9.6 billion, according to data released by the commerce ministry Friday.
Sensex was trading higher by 63.75 points at 36,699.85 while Nifty was quoted higher by 6.80 points at 11,059.80. The rupee appreciated by 30 paise to 69.98 against the US dollar in opening trade Thursday.