The Indian rupee appreciated by 20 paise to 70.87 against the US dollar in early trade on Thursday, as easing crude prices and optimism regarding US-China trade talks strengthened investor sentiments.
At the interbank foreign exchange the rupee opened at 70.96, then gained further ground and touched a high of 70.87, registering a rise of 20 paise over its previous close.
On Wednesday, rupee had settled at 71.07 against the US dollar.
The domestic unit however could not hold on to the gains and was trading at 71.03 against the dollar at 1008 hrs.
Forex traders said investors were optimistic about the US-China trade talks.
Meanwhile, ahead of the next round of trade negotiations between the two giant economies, US President Donald Trump said China is facing their hardest time in decades in maintaining the economy and badly wants to have a trade deal with the US.
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"China is having a hard time at this moment. And I think they'd like to make a deal very badly. And so we have a lot of things that are really exciting," Trump told reporters at the White House.
Moreover, weakening of the American currency vis-a-vis other currencies overseas also supported the rupee. The dollar index, which gauges the greenback's strength against a basket of six currencies, fell 0.12 per cent to 98.99.
Brent crude futures, the global oil benchmark, fell 0.17 per cent to trade at USD 58.22 per barrel.
Market participants, however, said sustained foreign fund outflows and cautious opening in domestic equities weighed on the local unit.
Domestic bourses opened on a cautious note on Thursday with benchmark indices Sensex trading 83.99 points lower at 38,093.96 and Nifty down 41.10 points at 11,272.20.
Foreign institutional investors (FIIs) remained net sellers in the capital market, pulling out Rs 485.24 crore on Wednesday, according to provisional exchange data.
The 10-year government bond yield was at 6.46 per cent in morning trade.