The rupee gained 4 paise to settle at 83.24 (provisional) against the US dollar on Tuesday, as a rally in domestic equity markets boosted investor sentiment.
However, elevated crude prices in the overseas markets and safe-haven dollar buying amid concerns over the conflict in the Middle East weighed on the domestic currency, forex traders said.
At the interbank foreign exchange, the rupee opened at 83.23 and traded in the narrow range of 83.22 to 83.26 against the greenback. It finally settled at 83.24 (provisional), registering a gain of 4 paise over its previous close.
On Monday, the rupee slipped 1 paise to settle at 83.28 against the US dollar.
The dollar index, which gauges the greenback's strength against a basket of six currencies, was trading 0.27 per cent lower at 105.80.
Brent crude futures, the global oil benchmark, fell by 0.23 per cent to USD 87.95 per barrel.
On the domestic equity market front, the BSE Sensex closed 566.97 points or 0.87 per cent higher at 66,079.36. The broader NSE Nifty climbed 177.50 points or 0.91 per cent to 19,689.85.
Foreign Institutional Investors (FIIs) were net sellers in the capital market on Monday as they offloaded shares worth Rs 997.76 crore, according to exchange data.