The Indian rupee appreciated 38 paise against the US dollar on Friday tracking weakness in the greenback and upbeat domestic equity market amid sustained foreign capital inflows, analysts said.

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The rupee opened at 74.60, and settled for the day at 74.66 against the US dollar, registering a jump of 38 paise over its previous close of 75.04.

This week the rupee strengthened more than 1 percent as investors remained bullish on optimism over potential COVID-19 vaccine, positive domestic equities, steady crude oil prices and a weak dollar.

"This week there has been a shift in USDINR spot trading range to 74.50-75.50. The spot was holding the psychological support of 75, however, it broke mainly due to the dollar inflows likely on account of Reliance Jio, and hopes of a V-shape recovery in the global growth," said Rahul Gupta, Head of Research- Currency, Emkay Global Financial Services.

Gupta expects the 74.50 to act as strong support and consistent trading above 75 may push prices towards 75.50.

Investor sentiment was boosted after the Drugs Controller General of India (DCGI) approved human clinical trials for a potential COVID-19 vaccine indigenously developed by Ahmedabad-based Zydus Cadila Healthcare Ltd.

The Reserve Bank of India (RBI) has been active in intervening and sucking out all the dollar inflows. This has also led the country's forex reserves to jump to a record above $500 billion.

Further, strength in rupee was also supported by likely foreign capital inflows into domestic equity markets related to Reliance Industries' stake sale in its digital subsidiary Jio Platforms.

The foreign institutional investors (FII) and foreign portfolio investors (FPI) have infused Rs 21,832 crore in the domestic equity markets in the month of June.

Globally, reigniting US-China trade war may put some pressure over the safe-haven demand for dollar in Asian trade, Gupta said.

The dollar index, which gauges the greenback's strength against a basket of six currencies, fell 0.11 percent to 97.20.

Meanwhile, stable crude oil prices helped gains in the rupee.

Brent crude was down 52 cents, or 1.2 percent, at $42.62 a barrel, and US West Texas Intermediate (WTI) crude fell 50 cents, or 1.2 percent, to $40.15.

(With agency inputs)