The Indian rupee strengthened by 21 paise to 74.43 against the US dollar in early trade on Monday, tracking a firm trend in the domestic equity market.
At the interbank foreign exchange, the domestic unit opened at 74.49 against the dollar, then inched higher to 74.43, registering a gain of 21 paise over its previous close.
On Friday, the rupee had settled at 74.64 against the US dollar.
Meanwhile, the dollar index, which gauges the greenback's strength against a basket of six currencies, was trading 0.06 per cent up at 92.18.
"Flows from Zomato IPO should start hitting the market as dollar eases after the Reserve Bank of India strongly ensured that 74.80 is not breached on the upside.
"Range for the day 74.30 to 74.70. Exporters to sell near to the higher end of 74.70, while importers to buy near the lower end for near-term imports," said Anil Kumar Bhansali, Head of Treasury, Finrex Treasury Advisors.
On the domestic equity market front, BSE Sensex was trading 258.91 points or 0.49 per cent higher at 52,645.10, while the broader NSE Nifty advanced 90.80 points or 0.58 per cent to 15,780.60.
Forex traders said foreign fund outflows and firm crude oil prices could weigh on investor sentiment and cap the appreciation of the local unit.
Foreign institutional investors were net sellers in the capital market on Friday as they offloaded shares worth Rs 1,124.65 crore, as per exchange data.
Global oil benchmark Brent crude futures fell 0.21 per cent to USD 75.39 per barrel.