The rupee appreciated 6 paise to close at 83.31 against the US dollar on Tuesday following a weak greenback against major currencies overseas and softening crude oil prices in international markets.
However, a sluggish trend in the domestic equity markets restricted the sharp upside in the local currency, forex traders said.
At the interbank foreign exchange market, the local unit opened strong at 83.32 and touched an intraday high of 83.26 and a low of 83.36. The domestic unit finally settled at 83.31 (provisional), a gain of 6 paise from its previous close.
On Friday, the rupee had settled at 83.37 against the US dollar.
The forex market was closed on Monday on account of general elections.
"A decline in crude oil prices and fresh foreign inflows also supported the rupee. US Dollar softened on rate cut expectations by Fed but hawkish comments by Fed officials supported the US dollar at lower levels," Anuj Choudhary – Research Analyst at Sharekhan by BNP Paribas, said.
On the domestic equity market front, the 30-share BSE Sensex fell 52.63 points or 0.07 per cent to settle at 73,953.31, while the broader NSE Nifty rose 27.05 points or 0.12 per cent to 22,529.05.
"The rupee traded positively. This strength is attributed to predictions of the current government winning the general election, leading to increased stability.
"Additionally, Domestic Institutional Investors (DIIs) have been actively buying into capital markets. Soft crude prices and a stable dollar index also supported the rupee. The expected range for the rupee in the upcoming sessions is between 83.00 and 83.50," Jateen Trivedi, VP Research Analyst - Commodity and Currency, LKP Securities, said.
Foreign Institutional Investors (FIIs) were net sellers in the capital markets on Saturday, as they sold shares worth Rs 92.95 crore, according to exchange data.
Meanwhile, the dollar index, which gauges the greenback's strength against a basket of six currencies, fell 0.07 per cent to 104.38.
Brent crude futures, the global oil benchmark, declined 0.97 per cent to USD 82.90 per barrel.