The rupee rose 14 paise to 79.77 against the US dollar in early trade on Thursday, tracking the overnight weakness of the US currency.
However, higher oil prices, month-end importer demand and fears of a global slowdown may limit gains for the local unit, forex traders said.
At the interbank foreign exchange, the rupee opened at 79.80 against the US dollar and touched 79.77 in opening deals, registering a gain of 14 paise over its previous close.
On Wednesday, the rupee had closed 13 paise lower at 79.91 against the US dollar.
“The rupee opened slightly stronger than Wednesday’s close,” said Anil Kumar Bhansali, head of It’s like.” Treasury, Finrex Treasury Advisors.
Bhansali further said that the Dow Jones and Asian indices rose while Asian currencies also rose. “Although the dollar index declined below the level of 107, the dollar remains strong till it breaks the level of 105,” he said.
The dollar index, which gauges the greenback’s strength against a basket of six currencies, fell 0.22 per cent to 106.21.
Global oil benchmark Brent crude futures rose 0.83 per cent to $107.50 per barrel.
On the domestic equities front, the 30-share Sensex was trading 464.87 points or 0.83 per cent higher at 56,281.19, while the broader NSE Nifty rose 118.45 points or 0.71 per cent to 16,760.25.
Foreign institutional investors were net sell-offs in the capital markets on Wednesday, selling shares worth Rs 436.81 crore, according to exchange data.