The rupee appreciated by 8 paise to 72.88 per US dollar on Monday's opening trade, ahead of the Union Budget 2021-22 presentation in Parliament.
The domestic unit opened at 72.89 against the US dollar at the interbank forex market and inched higher to 72.88, rising 8 paise over its previous close.
On Friday, the rupee had settled at 72.96 against the American currency.
Reliance Securities said in a research note, "The focus of the market is currently on the upcoming federal budget on Monday. Traders will watch for any announcements that could have a bearing on equity flows, and in turn on the rupee in the near term. Asian currencies were weak against the greenback and could keep appreciation bias limited."
Meanwhile, FM Sitharaman has initiated with the announcement of budget from Parliament. In this year's budget, the Centre is expected to primarily focus on manufacturing, Atmanirbhar Bharat and healthcare as main themes. Agriculture and infrastructure may also receive a push.
The dollar index, fell 0.05 per cent to 90.53 against a basket of six currencies.
On the domestic equity market front, benchmark indices Sensex and Nifty rose sharply on Monday, ahead of the announcement of Union Budget 2021. BSE benchmark index S&P Sensex, traded 550 higher at 46,850 and NSE Nifty 50 index gained 140 points to 13,775.
FIIs have sold shares worth Rs 12,731 crore in last five trading sessions. FIIs offloaded shares worth Rs 5,930.66 crore on Friday and Rs 3,712.51 crore on net basis on Thursday, as per exchange data
Brent crude futures, the global oil benchmark, advanced 0.71 per cent to USD 55.43 per barrel. Oil price slipped on Friday due to concerns over demand due to covid-19 cases and slow pace of vaccine rollouts which overshadowed Saudi's oil supply cut.