Rupee appreciated 18 paise to 86.26 against the US dollar in morning trade on Friday, supported by positive domestic equities and soft American currency index.
Forex traders said weak crude oil prices and positive domestic markets supported the local unit, while sustained foreign fund outflows weighed on the local unit.
Traders further noted that the upcoming Union Budget will play a crucial role in shaping market sentiment and the rupee's trajectory.
At the interbank foreign exchange, the rupee opened at 86.31 and touched 86.26 against the US dollar, registering a rise of 18 paise from its previous close. The local unit also touched 86.33 against the US dollar initial trade.
On Thursday, the rupee declined 9 paise to settle at 86.44 against the US dollar.
The rupee has shown signs of resilience, appreciating over the past two trading sessions due to a weakening dollar. Moreover, on a positive note, upcoming inflows from fundraising activities by IREDA of USD 570 million are expected to provide additional support to the rupee, CR Forex Advisors MD -Amit Pabari said.
"... The USD/INR pair is expected to trade within the range of 86.20–86.80. A break below 86.20 could pave the way for further downside toward 85.80–86.00 levels," Pabari added.
Meanwhile, the dollar index, which gauges the greenback's strength against a basket of six currencies, was trading lower by 0.15 per cent at 107.88.
Brent crude, the global oil benchmark, fell by 0.22 per cent to USD 78.12 per barrel.
On the domestic equity market front both the benchmark indices Sensex and Nifty opened on a positive note. The 30-share sensitive index Sensex was trading 166.71 points or 0.22 per cent up at 76,687.09 in early trade. Similarly, the wide-based Nifty trading was trading higher by 49.30 points or 0.21 per cent at 23,254.65 points.
Foreign Institutional Investors (FIIs) remained net sellers in the capital markets on Thursday, as they offloaded shares worth Rs 5,462.52 crore, according to exchange data.
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