The rupee gained 39 paise to 84.18 against the US dollar in early trade on Monday, as continued foreign investor interest in Indian assets lent fundamental support to the local unit.
Forex traders said a sharp decline in crude oil prices and a positive trend in domestic equities enthused investors further.
Brent crude oil prices slumped nearly 4 per cent in the morning Asian trade after OPEC+ signalled over the weekend that they will further increase production in the coming months.
At the interbank foreign exchange, the domestic unit opened at 84.45 and fell to an early low of 84.47 and a high of 84.18 against the greenback, registering a gain of 39 paise over its previous close.
On Friday, the rupee witnessed high volatility as it hit a seven-month high and rose past the 84 per dollar level but pared all gains to settle 3 paise lower at 84.57 against the greenback.
The Indian rupee witnessed heightened volatility last week, driven by shifting market positions, steady capital inflows, and evolving Reserve Bank actions in the forex space, CR Forex Advisors MD Amit Pabari said.
Meanwhile, the dollar index was struggling at 99.69 just below 100 level even as concerns about a US recession ebbed a little after a solid March payrolls by lengthening the odds on a Fed Reserve rate cut in June.
The dollar index, which gauges the greenback's strength against a basket of six currencies, was trading lower by 0.26 per cent at 99.76.
Brent crude, the global oil benchmark, fell 3.59 per cent to USD 59.09 per barrel in futures trade.
"The OPEC+ announced a second straight monthly output hike for June, adding 411,000 barrels per day to global supply. Coupled with a 1 per cent decline in crude prices -- Brent settled at USD 61.245 -- this could ease India's oil import bill and support the rupee further," Pabari added.
In the domestic equity market, the 30-share BSE Sensex advanced 330.55 points, or 0.41 per cent, to 80,832.54, while the Nifty rose 115.75 points, or 0.48 per cent, to 24,462.45.
Foreign institutional investors (FIIs) bought equities worth Rs 2,769.81 crore on a net basis on Friday, according to exchange data.
Meanwhile, India's forex reserves increased USD 1.983 billion to USD 688.129 billion during the week ended April 25, the RBI said on Friday.
This is the eighth consecutive week of a rise in the kitty, which had jumped 8.31 billion to USD 686.145 in the previous reporting week.
Except for the headline, this story has not been edited by The Telegraph Online staff and has been published from a syndicated feed.