Rupee appreciated 7 paise to 84.64 against the US dollar in morning trade on Friday, ahead of the Reserve Bank's monetary policy decision.
Forex traders said fresh foreign fund inflows supported investor sentiments, however, a muted trend in domestic equities weighed on the domestic unit.
Moreover, market participants are also awaiting cues from the upcoming Reserve Bank of India (RBI) monetary policy on Friday, which will likely focus on balancing inflation and growth.
At the interbank foreign exchange, the rupee opened at 84.66 and moved in a tight range and touched 84.64 against the greenback, registering a gain of 7 paise over its previous close.
On Thursday, the rupee recovered from its all-time low level and settled for the day with gains of 4 paise at 84.71 against the US dollar.
"The Indian rupee is expected to open a tad stronger after the Central Bank sold dollars at 84.75 levels and ensured it stayed in the range of 84.70 to 84.75. As the RBI announces policy rates amidst a weaker currency and stronger markets the range for rupee is expected between 84.60-84.80," Anil Kumar Bhansali, Head of Treasury and Executive Director Finrex Treasury Advisors LLP said.
The Reserve Bank's high-level panel on Wednesday started deliberations on the bi-monthly monetary policy amid expectations of status quo on interest rate as the retail inflation is above the upper tolerance level of the central bank.
The decision taken by the RBI Governor Shaktikanāta Das headed six-member Monetary Policy Committee (MPC) is awaited.
"The market has factored in no cut on Friday for the 11th time but the Central Bank always surprises the markets. If the Bank cuts rates it would be for the first time since May-2020," Bhansali said.
Meanwhile, the dollar index, which gauges the greenback's strength against a basket of six currencies, was trading higher by 0.06 per cent at 105.78.
Brent crude, the global oil benchmark, fell by 0.04 per cent to USD 72.06 per barrel in futures trade.
On the domestic equity market front, the 30-share benchmark index Sensex was trading 34.02 points, or 0.04 per cent higher, to 81,799.88 points. The Nifty rose 6.85 points, or 0.03 per cent, to 24,715.25 points.
Foreign Institutional Investors (FIIs) were net buyers in the capital markets on Thursday, as they purchased shares worth Rs 8,539.91 crore, according to exchange data.
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