The rupee appreciated 5 paise to 83.45 against the US dollar in early trade on Friday, as the American currency retreated from its elevated levels and was supported by significant foreign fund inflows.
At the interbank foreign exchange market, the local unit opened at 83.48 and gained further to 83.45 against the greenback, registering a rise of 5 paise from its previous close.
On Thursday, the rupee pared its initial losses and settled for the day on an almost flat note at 83.50 against the US dollar.
Forex traders said rising crude oil prices weighed on investor sentiments and restricted the upside. Brent crude futures, the global oil benchmark, declined 0.37 per cent to USD 87.11 per barrel.
"The pressure stems from oil marketing companies purchasing crude in anticipation of further price hikes, with Brent oil hovering around USD 87 per barrel. Additionally, it appears the Reserve Bank of India (RBI) is managing the rupee's volatility, capping both its upward and downward movements," CR Forex Advisors MD Amit Pabari said.
Meanwhile, the dollar index, which gauges the greenback's strength against a basket of six currencies, was trading at 105, lower by 0.12 per cent.
"The Dollar Index fell towards 105 levels and US 10-year bond yields dropped towards 4.35 per cent, as a series of economic data showed a cooling US economy, thereby heightening the expectations that the US Fed will cut rates sometime soon," Pabari added.
On the domestic equity market front, the 30-share BSE Sensex fell 386.58 points, or 0.48 per cent, to 79,663.09 points. The broader NSE Nifty declined 84.85 points, or 0.35 per cent, to 24,217.30 points.
Foreign Institutional Investors (FIIs) were net buyers in the capital markets on Thursday, as they purchased shares worth Rs 2,575.85 crore, according to exchange data.
Except for the headline, this story has not been edited by The Telegraph Online staff and has been published from a syndicated feed.