The rupee rose by 16 paise to 68.79 against the US dollar in opening trade Wednesday, driven by selling of the American currency by exporters in overseas markets.
The rupee later gained further ground to touch 68.79 per dollar, displaying gains of 16 paise over its previous close.
On Tuesday, rupee had settled at 68.95 against the US dollar.
However, rising crude oil prices and foreign fund outflows weighed on the domestic currency. As per market participants, the currency market is expected to witness volatility ahead of the Union Budget scheduled Friday.
Foreign institutional investors (FIIs) remained net sellers in the capital markets, pulling out Rs 512 crore, while domestic institutional investors (DII) bough shares amounting Rs 141.09 crore, provisional data available with stock exchanges showed Tuesday.
Domestic equity benchmarks BSE Sensex and NSE Nifty started on a flat note Wednesday amid weak asian cues and continued foreign fund outflow. Fall in GST collections, slow progress of monsoon too weighed on market mood here, traders added.
Traders said markets had turned conscious ahead of the highly anticipated outcome of the first Budget of the second term of the Modi government, which will be presented by FM Nirmala Sitharaman will present on July 5, 2019. Additionally, Chief Economic Advisor KV Subramanian will table the Economic Survey before the Parliament tomorrow on July 4.
Top gainers in the Sensex pack in early trade included Yes Bank, IndusInd Bank, Asian Paints, M&M, Axis Bank, NTPC and PowerGrid, while Vedanta, ONGC, HDFC, Tata Steel, ITC, TCS and HUL fell the most in the early trading session.
On Tuesday, Sensex settled 129.98 points, or 0.33 per cent, higher at 39,816.48, and the Nifty50 rose 44.70 points, or 0.38 per cent, to finish at 11,910.30.
Domestic investors followed cues from other Asian equities which remained volatile amid fears of a global economic slowdown amid weakening global manufacturing growth, they said. Further, U.S.-China trade truce was overtaken by fresh concerns over Washington's threat of tariffs on additional European goods. The US has proposed $4bn tariff on European region.
Shanghai Composite Index, Hang Seng, Nikkei and Kospi were trading on a negative note in their respective early sessions. While on Wall-Street, US stocks managed modest gains with S&P 500 closing at a record high yesterday.
(Edited with agency inputs)