The Indian rupee opened 5 paise higher at 71.38 against the US dollar in early trade on Thursday tracking positive opening in domestic equities and foreign fund inflows.
Forex traders said rupee was trading in a narrow range as market participants remained cautious ahead of the Brexit summit scheduled later this week and on the domestic front, the RBI meeting minutes that will be released on Friday.
At the interbank foreign exchange, the rupee opened on a positive note at 71.38 then lost momentum and fell to 71.47 against the US dollar, showing a decline of 4 paise over its previous closing.
The Indian rupee on Wednesday had closed at 71.43 against the US dollar.
The local unit however gained some strength and was trading at 71.35 against the US dollar at 1058 hours.
Forex traders said gains in domestic equities, foreign fund inflows, easing crude prices and optimism about the US-China trade deal supported investor sentiments.
Domestic bourses opened on a cautious note on Thursday with benchmark indices Sensex trading 47.33 points higher at 38,646.32 and Nifty up by 3.75 points at 11,467.75.
Foreign institutional investors (FIIs) purchased shares worth Rs 686.33 crore on Wednesday, according to provisional exchange data.
The dollar index, which gauges the greenback's strength against a basket of six currencies, was unchanged at 97.99.
Crude oil benchmark, Brent Futures, eased 0.69 per cent to USD 59.01 per barrel.
Meanwhile, on the global front, US President Donald Trump on Wednesday said the partial trade deal agreed with China last week is now being formally put on paper.
On Friday last week, Trump said that the US has reached a "very substantial" Phase 1 trade deal with China.
Echoing his words, China on Tuesday had asserted that it was on the "same page" with the US on trade as it confirmed that the two countries are likely to sign a "phase one agreement" soon to end their trade war.
"It (the deal) hasn't been papered yet, but it is being papered," Trump told reporters at the White House.
The 10-year government bond yield was at 6.46 per cent in morning trade.