The rupee rose to its strongest level in nearly two weeks Friday as appetite for riskier assets improved after European leaders thrashed out a plan Thursday to contain the region's debt crisis, propelling the euro and global equities higher.

At 10:53 a.m. (0523 GMT), the partially convertible rupee was at 48.80/81 per dollar, 1.5 percent stronger than its previous close of 49.51/52 on Tuesday, after touching a high of 48.7725 -- a level not seen since Oct. 17 in early trade.

The domestic currency market was closed on Wednesday and Thursday for religious festivals.

The European deal has reversed the sentiment into a risk-on mode. This has pushed the euro sharply higher and the rupee is trying to make up for the lost time, said Pramod Patil, senior foreign exchange dealer at State Bank of Mauritius.

Patil added he expects the rupee to climb to 48.70 during the day. However, some traders expect any rise above 48.80 to be temporary.

Residual month-end dollar demand from oil importers could weigh on the local currency, traders said.

Oil is India's biggest import item and local oil refiners are the largest purchasers of dollars in the domestic foreign exchange market.

The euro came off a seven-week peak on Friday as investors took a breather after a huge relief rally in riskier assets following a deal on Europe's debt crisis, though investors were eyeing more short-term gains in the currency.

The single currency was at $1.4179 after touching a high of $1.4200, while the index of the dollar against six major currencies was at 75.002 points from 74.879 points previously.

The BSE Sensex gained more than 2.6 percent on Friday on back of the global risk rally.

The one-month onshore forward premium on the rupee was at 23.75 points from 25 on Tuesday, the three-month premium was 64 points from 64.5 and the one-year premium was at 155.25 points, from 148.

The one-month offshore non-deliverable forward contracts were quoted at 49.06, weaker versus the spot rupee rate.

In the currency futures market , the most traded near-month dollar-rupee contracts on the National Stock Exchange, the MCX-SX and the United Stock Exchange were all at 49.0550. The total traded volume on the three exchanges was $992 million.