The rupee appreciated 11 paise to 74.64 against the US dollar to quote at Dh20.33 in opening trade on Thursday supported by weak American currency and foreign fund inflows.
At the interbank forex market, the domestic unit opened on a strong note at 74.65, gained further ground and touched 74.64 against the US dollar, registering a rise of 11 paise over its previous close. It had settled at 74.75 against the US dollar on Wednesday.
Forex traders said the uptick in the rupee was supported by weak greenback, but rising tensions between the US and China could limit the gains for the domestic unit.
Abhishek Goenka, Founder and CEO, IFA Globa, said: "USDINR continues to find support around 74.50. Stops would likely get triggered on break of that level which could result in a swift gamma move. Forwards have got paid with 1y at 296p (3.95 per cent). The 25 delta risk reversals have fallen to pre crisis levels of around 0.95 per cent indicating vols have got skewed in favour of puts."
The United States has ordered China to close its consulate in Houston. Meanwhile, Beijing has denounced the order on Wednesday as "outrageous" and said it would draw a firm response if not reversed.
"Escalating tensions between the US and China could keep appreciation bias limited," Reliance Securities said in a research note adding that weaker Asian currencies could also weigh on sentiments for the local unit.
The dollar index, which gauges the greenback's strength against a basket of six currencies, fell 0.08 per cent to 94.91.
"Improvement in forex reserves, lower imports and a prospects of weakening Dollar are some of the reasons why the INR is slightly appreciating. Still on a YTD basis the INR has depreciated more than 4.50 per cent. In the near term expect the currency to be in the range of 74-75 range," said Krishnan Ramachandran, CEO, Barjeel Geojit Securities.