The rupee consolidated in a narrow range and settled for the day higher by 2 paise at 83.28 (provisional) against the US dollar on Monday.
Forex traders said positive macroeconomic data supported the rupee, while geopolitical tensions, particularly the Israel-Hamas conflict, dented investor sentiments.
At the interbank foreign exchange market, the local unit opened at 83.25 against the US dollar and moved in a range of 83.24 to 83.28 in the day trade.
The rupee finally settled 2 paise higher at 83.28 (provisional) against the previous close.
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On Friday, the rupee fell 6 paise to settle at 83.30 against the US dollar.
Risk aversion in global markets and surge in crude oil prices put downside pressure on the domestic currency. However, lower than expected WPI and some FII buying on Friday cushioned the downside.
The wholesale price index-based inflation remained in the negative territory for the sixth straight month in September at (-) 0.26 per cent, on easing prices of food articles.
The US dollar eased slightly after the US and its allies tried to step in to contain the Hamas-Israel conflict, which has waned some safe haven demand for the greenback, said Anuj Choudhary - Research Analyst at Sharekhan by BNP Paribas.
"We expect rupee to trade with a slight negative bias as risk aversion in global markets and elevated crude oil prices may keep rupee under pressure. However, ceasefire or truce talks may support rupee," Choudhary added.
Meanwhile, the dollar index, which gauges the greenback's strength against a basket of six currencies, fell 0.13 per cent to 106.51.
Brent crude futures, the global oil benchmark, declined 0.08 per cent to $90.82 per barrel.
On the domestic equity market front, the BSE Sensex closed 115.81 points or 0.17 per cent lower at 66,166.93. The broader NSE Nifty declined 19.30 points or 0.1 per cent to 19,731.75.
Foreign Institutional Investors (FIIs) were net buyers in the capital markets on Friday as they purchased shares worth ₹317.01 crore, according to exchange data.
Meanwhile, the country's forex reserves dropped by a further $2.166 billion to $584.742 billion for the week ended October 6, the RBI said on Friday.
India's forex kitty had gone down by $3.794 billion to $586.908 billion in the previous week.