The Indian rupee appreciated by 17 paise to 71.67 against the US dollar in early trade on Friday as gains in domestic equity market and resumption of US-China trade talks in October strengthened investor sentiments.
At the interbank foreign exchange the rupee opened at 71.87, then gained further ground and touched a high of 71.67, registering a rise of 17 paise over its previous close.
On Thursday, rupee had settled for the day with gains of 28 paise at 71.84 against the US dollar.
The domestic unit however could not hold on to the gains and was trading at 71.73 against the dollar at 0949 hrs.
Forex traders said investors were optimistic about the US-China trade talks in October.
China and the US have agreed to hold the next round of trade negotiations in Washington in early October to end the bruising trade war.
Besides, higher opening in domestic equities supported the local unit.
Domestic bourses opened on a positive note on Friday with benchmark indices Sensex trading 153.43 points higher at 36,797.85 and Nifty up 44.20 points at 10,892.10.
Moreover, weakening of the American currency vis-a-vis other currencies overseas also dragged the rupee down. The dollar index, which gauges the greenback's strength against a basket of six currencies, fell marginally by 0.01 per cent to 98.40.
Market participants, however, said sustained foreign fund outflows and rising crude prices weighed on local currency.
Foreign institutional investors (FIIs) remained net sellers in the capital market, pulling out Rs 561.17 crore on Thursday, according to provisional exchange data.
Brent crude futures, the global oil benchmark, rose 0.25 per cent to trade at USD 61.10 per barrel.
The 10-year government bond yield was at 6.59 per cent in morning trade.