The rupee rose 2 paise to 83.97 against the US dollar in early trade on Monday, aided by a weaker greenback in the international market and a drop in crude oil prices.
The increase in the country's forex reserves to a new all-time high of $704.88 billion on Friday further pushed the domestic currency, according to forex traders.
However, growing escalation of the conflict in the Middle East and FIIs outflow on Friday capped sharp gains in the domestic unit, they said.
At the interbank foreign exchange, the rupee opened at 83.96 against the US dollar, 3 paise higher from its previous close of 83.99. It then declined 1 paisa to 83.97, higher by 2 paise from Friday's close.
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India's forex reserves jumped $12.588 billion to a new all-time high of $704.885 billion for the week ended September 27, the Reserve Bank of India said on Friday.
On the domestic equity market front, the Sensex rose 228.16 points, or 0.28 per cent, to 81,916.61. The Nifty rose 67.60 points, or 0.27 per cent to 25,081.30. Both indices suffered sharp falls in the previous week.
Meanwhile, the dollar index, which gauges the greenback's strength against a basket of six currencies, was marginally down 0.01 per cent to 102.50.
Brent crude, the international benchmark, declined 0.44 per cent to $77.71 in futures trade.
Foreign Institutional Investors (FIIs) were net sellers in the capital markets on Friday, offloading shares worth ₹9,896.95 crore on a net basis in the cash segment, according to exchange data.