The rupee appreciated by 6 paise to 83.24 against the US dollar in early trade on Monday supported by positive macroeconomic data.
Forex traders said falling domestic inflation, rise in industrial production figures and improvement in trade deficit aided the local unit.
However, geopolitical tensions, particularly the Israel-Hamas conflict, dented investor sentiments.
At the interbank foreign exchange, the domestic unit opened at 83.25 against the dollar and then touched an early high of 83.24, registering a gain of 6 paise over its previous close.
On Friday, the rupee fell 6 paise to settle at 83.30 against the US dollar.
"For now, a mild risk-off stance supports USD demand, but positive economic data and RBI intervention maintain the rupee's range between 83.05 and 83.30. The situation remains delicate, with the potential for rapid shifts in response to geopolitical developments," CR Forex Advisors MD-Amit Pabari said.
The dollar index, which gauges the greenback's strength against a basket of six currencies, was trading 0.10 per cent down at 106.53.
Brent crude futures, the global oil benchmark, advanced 0.11 per cent to $90.99 per barrel.
In the domestic equity market, the 30-share BSE Sensex was trading 161.12 points or 0.24 per cent lower at 66,121.62. The broader NSE Nifty declined 36.10 points or 0.18 per cent to 19,714.95.
Foreign Institutional Investors (FIIs) were net buyers in the capital markets on Friday as they purchased shares worth ₹317.01 crore, according to exchange data.
Meanwhile, the country's forex reserves dropped by a further $2.166 billion to $584.742 billion for the week ended October 6, the RBI said on Friday.
India's forex kitty had gone down by $3.794 billion to $586.908 billion in the previous week.
According to the government data released on Thursday, India's retail inflation moderated to a three-month low of 5 per cent in September, while factory output in August soared to a 14-month high of 10.4 per cent.