The rupee gained 5 paise to 82.67 against the US dollar in early trade on Friday, supported by foreign fund inflows and a positive trend in domestic equities.
Forex traders said the rupee was trading in a narrow range amid strengthening of the US dollar.
The dollar index is trading above the 104 level on safe-haven appeal, as US President Joe Biden and Republican House Speaker Kevin McCarthy are reportedly close to reaching an agreement on the US debt ceiling.
At the interbank foreign exchange, the domestic unit opened at 82.73 against the dollar, then rose to 82.67, registering a gain of 5 paise over its previous close.
On Thursday, the rupee closed at 82.72 against the US currency.
Meanwhile, the dollar index, which gauges the greenback's strength against a basket of six currencies, fell 0.16 per cent to 104.08.
"Currently, the DXY is hovering near the 104-mark and is likely to move higher towards the 105-105.50 levels in the coming days, and thus will make developed and emerging market currencies vulnerable," CR Forex Advisors MD-Amit Pabari said.
Pabari further said, "overall, we expect the volatility to remain higher ahead of the debt ceiling renewal concern and thus the pair is expected to trade in a range of 82.20 to 83.20." Brent crude futures, the global oil benchmark, declined 0.29 per cent to $76.04 per barrel.
In the domestic equity market, the 30-share BSE Sensex advanced 203.13 points or 0.33 per cent to 62,075.75. The broader NSE Nifty rose 49.55 points or 0.27 per cent to 18,370.70.
Foreign Institutional Investors (FIIs) were net buyers in the capital market on Thursday as they purchased shares worth Rs 589.10 crore, according to exchange data.