Representative image of 500 rupee notes and coins.
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The rupee appreciated 3 paise to 83.22 against the US dollar on Wednesday, tracking cues from positive equity markets and a weaker American currency against major rivals overseas.
However, selling pressure from foreign equity investors weighed on the Indian currency, forex traders said.
At the interbank foreign exchange, the rupee opened at 83.20 and then touched 83.22 against the greenback, up 3 paise from its previous close.
On Tuesday, the rupee settled at 83.25 against the US dollar.
The dollar index, which gauges the greenback's strength against a basket of six currencies, was trading 0.05 per cent lower at 105.77.
Gaurang Somaiya, forex and bullion analyst at Motilal Oswal Financial Services, said the rupee traded within a narrow range even after more updates came in on the escalating conflict in Israel.
According to him, traders are expected to remain watchful of the US Federal Open Market Committee (FOMC) minutes that may indicate more interest rate hikes, adding strength to dollar.
'We expect the USD-INR (spot) to trade sideways and quote in the range of 83.05 and 83.40,' Somaiya added.
Brent crude futures, the global oil benchmark, rose 0.31 per cent to $87.92 per barrel.
In the domestic equity market, the 30-share BSE Sensex jumped 389.68 points or 0.58 per cent to 66,469.04 points while the broader NSE Nifty advanced 115 points or 0.58 per cent to 19,804.85 points.
Foreign Institutional Investors (FIIs) were net sellers in the capital market on Tuesday as they offloaded shares worth Rs 1,005.49 crore, as per exchange data.