The rupee appreciated by 4 paise to 83.97 against US dollar in early trade on Thursday supported by weakening of the American currency in the overseas market and a positive trend in domestic equities.

Forex traders said an overall drop in crude oil prices and foreign fund inflows aided investor sentiments.

At the interbank foreign exchange market, the local unit opened at 83.98, then inched further to touch 83.97, registering a rise of 4 paise from its previous close.

On Wednesday, the rupee breached the crucial 84-mark for the second time within a month and settled 3 paise lower at 84.01 against the American currency.

"The Indian rupee continues to remain weak despite Asian currencies rising as inflows get absorbed by the Reserve Bank, while oil companies and FPIs and importers continue to buy US dollars from market keeping the currency on the lower side despite gains seen by its Asian and emerging market counterparts," said Anil Kumar Bhansali, Head of Treasury and Executive Director Finrex Treasury Advisors LLP.

Meanwhile, the dollar index, which gauges the greenback's strength against a basket of six currencies, was down 0.03 per cent to 101.32 points.

Brent crude, the international benchmark, gained 0.19 per cent to USD 72.84 per barrel in futures trade. Forex traders said crude oil levels of USD 72 per barrel will act as a support for the domestic unit as India, the world's third-largest oil importer, stands to benefit from cheaper oil.

In the domestic equity market, the 30-share BSE Sensex advanced 27.21 points, or 0.03 per cent, to 82,379.85 points, while the Nifty was up 10.45 points, or 0.04 per cent, to 25,209.15 points.

Foreign Institutional Investors (FIIs) were net buyers in the capital markets on Wednesday, as they purchased shares worth Rs 975.46 crore, according to exchange data.

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