The Indian rupee rallied on Friday to climb above 83.50 per U.S. dollar for the first time since late July, boosted by dollar sales by foreign banks and a rise in most of its Asian peers. The rupee was at 83.

The US dollar index slipped to multi-month lows of around 101 level from a three-month high of 106 as investors ratcheted up bets for an aggressive US Fed rate cut

"The RBI seems to have loosened it's iron grip on the USD-INR pair as it allowed rupee to gain up to 83.56 before it bought dollars to allow a closure at 83.68," said Anil Kumar Bhansali, Head of Treasury and Executive Director at Finrex Treasury Advisors LLP.

The rupee has strengthened against the dollar following the US Fed's rate cut and positive economic commentary. Market experts predict further gains in the rupee as the interest rate differential between India and the US widens.