The Indian rupee appreciated by 8 paise to 70.75 against the US dollar in early trade on Monday as easing crude oil prices and positive developments on the US-China trade talk front strengthened investor sentiments.
Forex traders said the weakening of the US dollar vis-a-vis other currencies overseas also supported the rupee.
At the interbank foreign exchange the rupee opened at 70.80, then gained further ground and touched a high of 70.75, registering a rise of 8 paise over its previous close.
On Friday, rupee had settled for the day at 70.83 against the US dollar.
The domestic unit, however, could not hold on to the gains and was trading at 70.80 against the dollar at 0940 hrs.
US President Donald Trump on Friday said that the US and China have reached a historic agreement on a phase one trade deal.
The phase one of the trade deal requires structural reforms and other changes to China's economic and trade regime in the areas of intellectual property, technology transfer, agriculture, financial services, and currency and foreign exchange.
It also includes a commitment by China that it will make substantial additional purchases of US goods and services in the coming years.
Forex traders said higher opening in domestic equities and foreign fund inflows also supported the local unit, while weak macro economic numbers weighed on the domestic unit and restricted the upmove.
Rising food prices pushed the retail inflation in November to over three-year high of 5.54 per cent, while the industrial sector output shrank for third month in a row by 3.8 per cent in October.
Finance Minister Nirmala Sitharaman on Friday promised more stimulus measures for sectors of the economy in distress as she counted on steps taken till now to boost growth by driving up consumption.
Domestic bourses opened on a positive note on Monday with benchmark indices Sensex trading 31.38 points higher at 40,041.09 and Nifty up 5.80 points at 12,092.50.
Foreign institutional investors (FIIs) purchased shares worth Rs 115.70 crore on Friday, according to provisional exchange data.
Brent crude futures, the global oil benchmark, fell 0.35 per cent to trade at USD 64.99 per barrel.
The dollar index, which gauges the greenback's strength against a basket of six currencies, fell by 0.11 per cent to 97.06.
The 10-year government bond yield was at 6.77 per cent in morning trade.