The rupee rose by 30 paise to 81.95 against the US dollar in early trade on Friday amid gains in domestic equities and losses in crude oil prices.
FII inflows into local equities also bolstered the rupee sentiment, analysts said.
At the interbank foreign exchange, the domestic unit opened higher at 81.97, and then appreciated further to 81.95, registering a rise of 30 paise over its last close.
On Thursday, the rupee settled lower at 82.25 against the dollar due to a strong greenback overseas and a negative trend in domestic equities.
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Crude oil prices were trading lower on Friday with the benchmark, Brent crude, slipping 0.22 per cent to $75.50 per barrel.
The dollar index, which gauges the greenback's strength against a basket of six currencies, was marginally up 0.11 per cent at 102.23.
In the domestic equity market, the 30-share BSE Sensex was trading 262.23 points or 0.42 per cent higher at 63,179.86. The broader NSE Nifty rose by 77.80 points or 0.42 per cent to 18,765.90.
Foreign Institutional Investors (FIIs) were net buyers in the capital markets, on Thursday, as they purchased shares worth ₹3,085.51 crore, according to exchange data.