The Indian rupee appreciated by 8 paise to 71.17 against the US dollar in early trade on Wednesday tracking gains in domestic equity market and fresh foreign fund inflows.
Forex traders said rupee is trading in a narrow range as market participants are awaiting cues from the Reserve Bank of India's monetary policy outcome. Moreover, RBI's commentary on inflation and growth forecast will be followed closely by the investors, they said.
The Reserve Bank of India (RBI) is scheduled to announce the outcome of its sixth bi-monthly monetary policy statement for 2019-20 on February 6, 2020.
At the interbank foreign exchange the rupee opened at 71.25 and touched a high of 71.17, registering a rise of 8 paise over its previous close.
On Tuesday, rupee had settled for the day at 71.25 against the US dollar.
The domestic unit, however, could not hold on to the gains and was trading at 71.19 against the dollar at 1010 hrs.
Domestic bourses opened on a positive note on Wednesday with benchmark indices Sensex trading 182.25 points higher at 40,971.63 and Nifty up 53.90 points at 12,033.55.
Foreign institutional investors (FIIs) remained net buyers in the capital market, as they sold shares worth Rs 366.21 crore on Tuesday, according to provisional exchange data.
However, rising crude oil prices and strengthening of the American currency vis-a-vis other currencies overseas weighed on the rupee.
Brent crude futures, the global oil benchmark, rose 1.17 per cent to trade at 54.59 per barrel.
The dollar index, which gauges the greenback's strength against a basket of six currencies, rose by 0.05 per cent to 98.00.
The 10-year government bond yield was at 6.51 per cent in morning trade.