The rupee recovered from its all-time low level and appreciated by 5 paise to ₹83.65 against the US dollar in early trade on Monday, as the American currency retreated from its elevated level.
Forex traders said foreign fund inflows and possible intervention by the Reserve Bank of India (RBI) supported the rupee at lower levels and restricted the downfall.
At the interbank foreign exchange market, the local unit opened at ₹83.66, and touched an early high of ₹83.65, registering a gain of 5 paise from its previous close.
On Friday, the rupee depreciated 7 paise to settle at its all-time low of ₹83.70 against the US dollar.
"A weakening dollar -- prompted by shifts in the macroeconomic landscape and emerging cracks in US economic data -- caused the dollar index to dip to 104. This scenario saw emerging market currencies rising against the dollar," CR Forex Advisors MD Amit Pabari said.
However, despite these rupee-supporting factors, the Indian currency hasn't appreciated significantly, Pabari added.
- Also read: Currency Outlook: Dollar gets a breather
Meanwhile, the dollar index, which gauges the greenback's strength against a basket of six currencies, was at 104.29, lower by 0.10 per cent.
Brent crude futures, the global oil benchmark, rose 0.69 per cent to $83.20 per barrel.
On the macroeconomic front, India's forex reserves jumped by $9.699 billion to an all-time high of $666.854 billion for the week ended July 12, the RBI said on Friday.
In the previous reporting week, the kitty had increased by $5.158 billion to $657.155 billion, surpassing the previous high of $655.817 billion for the week ended June 7.
"This increase (in forex reserves) suggests that the RBI is actively preventing the Rupee from strengthening, even in the face of significant inflows into the equity and debt markets," Pabari said.
In the domestic equity market, the 30-share BSE Sensex was trading 264.92 points, or 0.33 per cent lower at 80,339.73 points. The broader NSE Nifty was down 88.10 points, or 0.36 per cent, to 24,442.80 points.
Foreign Institutional Investors (FIIs) were net buyers in the capital markets on Friday as they purchased shares worth ₹1,506.12 crore, according to exchange data.