The rupee gained 18 paise to 81.93 against the US dollar in early trade on Thursday tracking the broad weakness of the American currency in the overseas market.
Forex traders said foreign fund inflows also supported the local unit.
At the interbank foreign exchange, the domestic unit opened at 81.99 against the dollar, then climbed to 81.93, registering a rise of 18 paise over its previous close.
On Wednesday, the rupee closed at 82.11 against the US currency.
"Overall USDINR has strong support around 81.75-80 levels, as the RBI is intervening to protect from steep appreciation. Adding to it, the ongoing geopolitical concerns and Fed's hiking process are likely to weigh on investor sentiment and the USDINR could bounce back to 82.50-82.80 levels," CR Forex Advisors MD-Amit Pabari said.
Meanwhile, the dollar index, which gauges the greenback's strength against a basket of six currencies, rose 0.06 per cent to 101.55.
Brent crude futures, the global oil benchmark, declined 0.22 per cent to USD 87.14 per barrel.
"Brent has risen to USD 87.25 per barrel as weak US CPI could mean that the Fed could sound less hawkish," IFA Global Research Academy said in a research note.
In the domestic equity market, the 30-share BSE Sensex declined 43.95 points or 0.07 per cent to 60,348.82. The broader NSE Nifty declined 1.05 points or 0.01 per cent to 17,811.35.
Foreign Institutional Investors (FIIs) were net buyers in the capital market on Wednesday as they purchased shares worth Rs 1,907.95 crore, according to exchange data.
On the domestic macroeconomic front, retail inflation in March fell to a 15-month low of 5.66 per cent and came back to the Reserve Bank's comfort level of 6 per cent.
India's industrial production growth rose marginally to 5.6 per cent in February from 5.5 per cent in January 2023, mainly due to good performance of the power, mining and manufacturing sectors, according to official data released on Wednesday.
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