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The Indian rupee appreciated 51 paise to close at 79.25 against the US dollar on Friday, following positive trends in domestic equities and on hope that US Fed will go slow with rate hike after contraction of the US economy for the second consecutive quarter.

At the interbank foreign exchange market, the rupee ended at 79.25 against the US dollar, compared to 79.76 a dollar on Thursday.

"Rupee traded strong as dollar index witnessed weakness which pushed the dollar against rupee to low of 79.17 on Friday's trade as Fed's data-driven stance dragged the dollar lower at 106$... Crude price volatility kept gains somewhat limited in rupee as rupee rose from 80.00 to 79.25 in the week," said Jateen Trivedi, VP Research Analyst at LKP Securities.

The domestic benchmark indices ended higher for the third consecutive day and ended on a positive note. Sensex ended up 712.46 points, or 1.25 per cent, at 57,570.25, and the Nifty 50 closed up 228.65 points, or 1.35 per cent, at 17,158.25.

The dollar index was trading lower on Friday. It was at 105.72 by the closing of market hours.

"DXY had sharply fallen towards 105.55 levels and large exporters were also seen hedging their exposure helped rupee to appreciate. For USDINR, 79.02 now acts as an immediate support followed by 78.80 while 79.60 now turns as an immediate resistance," said Kunal Sodhani, Assistant Vice-President at Shinhan Bank India.

On the other hand, the US economy contracted for a second consecutive quarter, signaling a technical recession. Data showed that US GDP fell at a 0.9 per cent annualised rate in the second quarter. Consumer spending grew at its slowest pace in two years and business spending contracted.

"In FOMC, Fed indicated that further rate hike trajectory will be data dependent and later softer US GDP data indicated a technical recession which is now making investors price in a less aggressive tightening by the Fed," Sodhani added.