The rupee appreciated 12 paise to 81.96 against the US dollar in early trade on Friday, as a strong opening in domestic equity markets and a weaker greenback against major rivals overseas strengthened investor sentiments.
However, strengthening crude prices in international markets capped the gains in the domestic unit, forex traders said.
At the interbank foreign exchange, the domestic unit opened strong at 81.97 against the dollar and then gained further momentum to 81.96, a gain of 12 paise over its previous close.
In the initial trade, the domestic unit was moving in a narrow range of 81.92-81.97 against the American currency.
In the previous session on Thursday, the rupee had settled at 82.08 against the dollar.
The dollar index, which gauges the greenback's strength against a basket of six currencies, fell 0.19 per cent to 99.26.
Brent crude futures, the global oil benchmark, rose 0.11 per cent to USD 81.45 per barrel.
In the domestic equity market, the 30-share BSE Sensex was trading 164.96 points or 0.25 per cent higher at 65,723.85. The broader NSE Nifty advanced 56.15 points or 0.29 per cent to 19,469.90.
Foreign institutional investors (FIIs) emerged as net buyers in the capital markets on Thursday as they bought shares worth Rs 2,237.93 crore, according to exchange data.
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