The rupee appreciated 6 paise to 83.47 against the US dollar in early trade on Friday ahead of the RBI monetary policy announcement.
Forex traders said the outflow of foreign funds and an upward movement in the crude oil prices weighed on the Indian currency even though the local unit found support from positive domestic equity markets and softening American currency overseas.
They said that market participants are likely to take cues from the decision of Reserve Bank's rate-setting panel. The Monetary Policy Committee (MPC) of RBI, which began its three-day deliberations on Wednesday, will announce the outcome on Friday.
At the interbank foreign exchange market, the local unit opened at 83.46 and then slipped to 83.47 against the greenback, registering a gain of 6 paise from its previous close.
On Thursday, the rupee settled 9 paise lower at 83.53 against the dollar.
Meanwhile, the dollar index, which gauges the greenback's strength against a basket of six currencies, was trading 0.02 per cent higher at 104.07.
Brent crude futures, the global oil benchmark, advanced 0.14 per cent to USD 79.98 per barrel.
On the domestic equity market, the 30-share BSE Sensex climbed 251.40 points or 0.33 per cent to 75,325.91 in early trade. The NSE Nifty went up 91.65 points or 0.40 per cent to 22,913.05.
Foreign investors were net sellers of Indian equities on Thursday as they offloaded shares worth Rs 6,867.72 crore on a net basis.
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