The rupee rose 3 paise to 86.58 against the US dollar in early trade on Friday on the back of softening American currency.
Higher crude oil prices and volatile global trends failed to prevent the withdrawal of foreign funds from domestic equities, capping a significant recovery in the Indian currency, forex traders said.
At the interbank foreign exchange, the rupee opened at 86.60 and touched a high of 86.55 before trading at 86.58 against the greenback in initial deals, 3 paise higher from its previous close.
On Thursday, the rupee depreciated 21 paise to close at 86.61 against the US dollar. The local unit had settled with a gain of 13 paise at 86.40 against the dollar on Wednesday, a day after rebounding 17 paise from its lowest-ever level of 86.70 against the greenback.
Meanwhile, the dollar index, which gauges the greenback's strength against a basket of six currencies, was trading 0.02 per cent lower at 108.80.
Brent crude, the global oil benchmark, rose 0.39 per cent but stayed elevated at USD 81.61 per barrel in futures trade.
Analysts attributed the volatility in crude oil prices and dollar index to the geopolitical uncertainties ahead of the regime change in the US, which is expected to be followed by some restrictive trade policies under President Donald Trump.
In the domestic equity market, the 30-share BSE Sensex was trading 348.64 points, or 0.45 per cent, lower at 76,694.18 points, while the Nifty was down 99.45 points, or 0.43 per cent, at 23,212.35.
Foreign institutional investors (FIIs) offloaded equities worth Rs 4,341.95 crore on Thursday.
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