The rupee strengthened 40 paise to end at 61.44 against the dollar due to dollar selling by banks and exporters.
The domestic unit on Thursday plunged to a 7-month low of 61.84.
On Friday, the unit recovered 18 paise to open at 61.66 per dollar and declined to 61.74 at the Interbank Foreign Exchange Market as the American currency gained against other currencies.
However, it pared losses to gain at 61.41 against the greenback on robust capital inflows into the domestic equity market. BSE-benchmark Sensex ended higher by 109 points (0.42 per cent) at 26,108.
The RBI Governor, Raghuram Rajan on Thursday had said that India is seeing a pick-up in economic growth although more could be done to support that on a sustainable basis.
Call Rates up; Bond yields gain
The interbank call money rate, the rate at which banks borrow short term funds from one another, ended higher at 7.15 per cent after it ended sharply weaker at 6.90 per cent on Thursday. Intra-day, it moved in the 8.15 per cent to 7 per cent range.
The yield on 10-year benchmark 8.40 per cent government security, maturing in 2024, hardened to 8.39 per cent from the previous close of 8.36 per cent on Thursday. The price of the security ended weaker at Rs 100.05 from Rs 100.18.