The rupee appreciated 7 paise to 79.92 against the US dollar in early trade on Friday as a firm trend in domestic equities and fresh foreign fund inflows strengthened investor sentiment.
However, a strong greenback in the overseas markets capped the gains of the local unit, forex traders said.
At the interbank foreign exchange, the rupee opened up at 79.95 against the American dollar, then gained further strength to trade at 79.92 in early deals, registering a gain of 7 paise over the last close.
In the previous session, the rupee had closed at an all-time low of 79.99 against the greenback.
The local currency was moving in a range of 79.95 and 79.88 in the morning trade.
On the domestic equity front, the 30-share Sensex was trading 282.93 points or 0.53 per cent higher at 53,699.08, while the broader NSE Nifty advanced 82.95 points or 0.52 per cent to 16,021.60.
Meanwhile, the dollar index, which gauges the greenback's strength against a basket of six currencies, gained 0.03 per cent to 108.57.
Global oil benchmark Brent crude futures rose 1.19 per cent to $100.28 per barrel.
Foreign institutional investors turned net buyers in the capital market on Thursday, as they bought shares worth Rs 309 crore, as per exchange data.
Meanwhile, wholesale price-based inflation eased to a three-month low of 15.18 per cent in June on a sharp decline in the prices of minerals, but food articles continued to remain costly. June is the 15th consecutive month when the wholesale inflation was double-digit.
In May this year, it touched a record high of 15.88 per cent. In June 2021, it was 12.07 per cent.
India's current account deficit is expected to deteriorate in the current fiscal year on account of costlier imports and tepid merchandise exports, a finance ministry report said on Thursday.