The rupee Wednesday appreciated by 8 paise to 71.49 in early trade on the forex market amid positive opening in domestic equities and fresh foreign fund inflows.
Forex traders said investors were cautious ahead RBI's Monetary Policy Committee outcome scheduled for February 7.
Moreover, rising crude prices capped the gains for the domestic unit.
At the Interbank Foreign Exchange, the rupee opened higher at 71.56 then gained further ground to touch 71.49 against the US dollar, showing a gain of 8 paise over its previous closing.
In a very volatile trade, the domestic currency also touched a low of 71.60, showing a loss of 3 paise over its last close.
On Tuesday, the rupee had settled 23 paise higher at 71.57 against the US dollar.
Foreign funds purchased shares worth Rs 420.65 crore on a net basis, and domestic institutional investors bought shares worth Rs 194.31 crore Tuesday, provisional data showed.
The global benchmark, brent crude oil was trading at USD 62.02 per barrel, higher by 0.06 per cent.
Meanwhile, domestic equity market opened on a higher note. The 30-share BSE benchmark Sensex, was trading at 36,833.84, up 217.03 points in early trade. The wide-based Nifty was also trading up by 65 points at 10,999.35.