The rupee gained 9 paise to 81.29 against the US dollar in early trade on Monday supported by broad dollar weakness and a firm trend in domestic equities.
Forex traders said sustained foreign fund outflows weighed on investor sentiments and restricted the appreciation bias.
At the interbank foreign exchange, the domestic unit opened at 81.29 against the dollar, registering a rise of 9 paise over its previous close.
On Friday, it depreciated by 8 paise to close at 81.38 against the US dollar.
Meanwhile, the dollar index, which gauges the greenback's strength against a basket of six currencies, fell 0.32 per cent to 101.87.
Brent crude futures, the global oil benchmark, fell 0.53 per cent to USD 84.83 per barrel.
According to Sriram Iyer, Senior Research Analyst at Reliance Securities, the Indian rupee opened stronger on Monday, tracking a weak dollar and a possibility of smaller rate hike from the US Fed in February.
Most of the Asian peers were stronger this morning, and stable oil prices and the recent fall in Treasury yields could aid the local unit.
However, attractive rates for importers and possibility of dollar-buying intervention by the Reserve Bank of India could limit sharp gains.
In the domestic equity market, the 30-share BSE Sensex was trading 143.87 points or 0.24 per cent higher at 60,405.05. The broader NSE Nifty advanced 22.75 points or 0.13 per cent to 17,979.35.
Foreign Institutional Investors (FIIs) were net sellers in the capital market on Friday as they offloaded shares worth Rs 2,422.39 crore, according to exchange data.
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