The rupee appreciated 16 paise to 81.54 against the US dollar in early trade on Friday on broad dollar weakness and in line with its Asian peers.
At the interbank foreign exchange, the domestic unit opened at 81.69 against the dollar, then gained ground to touch 81.54, registering a rise of 16 paise over its previous close.
On Thursday, the rupee appreciated by 23 paise to close at 81.70 against the US dollar.
Forex traders said the American currency has retreated from its elevated levels post Federal Open Market Committee (FOMC) minutes.
The dollar index fell 0.23 per cent to 105.82.
Moreover, steady crude oil price is also aiding investor sentiments.
"Brent is steady around $85 per barrel after Thursday's drop which came on reports that the price caps proposed for Russian crude were too high and above the current levels," IFA Global Research Academy said in a note.
Brent crude futures advanced 0.20 per cent to $85.51 per barrel.
BSE Sensex was trading 39.89 points or 0.06 per cent lower at 62,232.79. Similarly, the broader NSE Nifty fell 12.65 points or 0.07 per cent to 18,471.45.
Foreign Institutional Investors (FIIs) were net buyers in the capital markets on Thursday as they purchased shares worth $1,231.98 crore, according to exchange data.