The rupee appreciated 4 paise to 83.57 against the US dollar in early trade on Tuesday, supported by positive trend in domestic equities and foreign fund inflows.
Forex traders said dollar demand from local importers limited the rupee's upward momentum.
At the interbank foreign exchange market, the rupee opened at 83.59 and gained ground to trade at 83.57 against the greenback in initial deals, registering a rise of 4 paise from its previous closing level.
On Monday, the rupee depreciated 10 paise to 83.61 against the US dollar.
"The Indian rupee is currently caught in a tug-of-war between negative and positive forces, trading within a tight range," CR Forex Advisors MD Amit Pabari said, adding that continuous intervention by the Reserve Bank of India has helped prevent significant depreciation.
Meanwhile, the dollar index, which gauges the greenback's strength against a basket of six currencies, was at 104.33, higher by 0.14 per cent, driven by stronger-than-expected US Producer
