The rupee is trading at 62.33/34 versus its close of 62.3650/3750, tracking some gains in the domestic sharemarket.
The BSE Sensex is trading up half a percent and will be watched for fund flows. .BO
Traders also expect dollar inflows towards the Vodafone deal, spectrum auctions among other things.
Vodafone Group Plc (VOD.L) won the cabinet's approval for its $1.6 billion deal to buy out minority partners in its unit in the country, Information and Broadcasting Minister Manish Tewari said on Thursday.
Gains in the rupee come after the RBI said late on Wednesday that the government had cancelled its previously deferred bond sale of 150 billion rupees.
The cancellation shows the government is confident of meeting its fiscal deficit target of 4.8 percent of GDP for 2013/14, traders say.
The rupee could strengthen further in the near-term to around 61.80 to a dollar, trader says, as the government's cash position is set to improve further due to gains from the ongoing mobile spectrum auction.
Globally, the dollar struggles against Asian currencies ahead of key event risks, namely the ECB's policy decision due later on Thursday and U.S. jobs data on Friday.