The Indian rupee appreciated by 8 paise to close at 83.87 (provisional) against the US dollar on Monday, supported by a weak US dollar and a decline in crude oil prices.
Forex traders said fresh foreign fund inflows boosted investor sentiments.
At the interbank foreign exchange, the rupee opened at 83.88 against the greenback, then gained ground and touched an intra-day high of 83.84, and a low of 83.93 against the American currency.
The local currency finally settled for the day at 83.88 (provisional) against the American currency.
On Friday, the rupee moved in a tight range and settled just 1 paisa lower at 83.95 against the American currency.
Over the past shortened week, the rupee showed minimal fluctuation and narrowly steered clear of the critical 84-mark.
"We expect the rupee to trade with a slight positive bias on rise in risk appetite in global markets and a weak US dollar. Softening of crude oil prices may also support the rupee," said Anuj Choudhary -- Research Analyst at Sharekhan by BNP Paribas.
Traders said geopolitical tension in the Middle East may cap a sharp upside for the local unit.
Investors may remain cautious ahead of PMI data from the US and Fed Chair Jerome Powell's speech at Jackson Hole Symposium for any cues on rate cuts by the central bank.
Meanwhile, the dollar index, which gauges the greenback's strength against a basket of six currencies, was trading lower by 0.28 per cent to 102.17.
Brent crude, the global oil benchmark, declined 0.87 per cent to USD 78.99 per barrel.
On the domestic equity market front, Sensex declined 12.16 points, or 0.02 per cent, to 80,424.68 points. The Nifty rose 31.50 points, or 0.13 per cent, to 24,572.65 points.
Foreign institutional investors (FIIs) were net buyers in the capital markets on Friday, as they purchased shares worth Rs 766.52 crore, according to exchange data.
Meanwhile, India's forex reserves dropped USD 4.8 billion to USD 670.119 billion for the week ended August 9, the Reserve Bank of India said on Friday.
In the previous reporting week, the kitty jumped USD 7.533 billion to an all-time high of USD 674.919 billion.