The rupee strengthened by 6 paise to 78.04 against the US dollar in opening trade on Friday as easing crude oil prices supported the local unit.
However, unabated foreign fund outflows, a lacklustre trend in domestic equities and strong American dollar overseas restricted the gain, forex dealers said.
At the interbank foreign exchange, the rupee opened strong at 78.03 against the US dollar, then inched lower to quote 78.04, registering a rise of 6 paise over the last close.
In the previous session, the rupee had closed at 78.10 against the US dollar.
On the domestic equity market front, the 30-share Sensex was trading 251.06 points or 0.49% lower at 51,244.73, while the broader NSE Nifty fell 90.15 points or 0.59 % to 15,270.45.
Meanwhile, the dollar index, which gauges the greenback's strength against a basket of six currencies, rose 0.60% to 104.25.
Global oil benchmark Brent crude futures slipped 0.78% to USD 118.88 per barrel.
Foreign institutional investors were net sellers in the capital market on Thursday as they offloaded shares worth Rs 3,257.65 crore, as per exchange data.
Meanwhile, an RBI article has said India is better placed than many other countries to avoid the risks of potential stagflation with recovery broadly on track, notwithstanding an increasingly hostile external environment.
The government does not see any adverse impact on the Indian economy post the US Federal Reserve's decision to raise interest rates by 75 basis points, Economic Affairs Secretary Ajay Seth said on Thursday.
"All central banks are grappling with it and taking adequate measures which are needed to control the inflation. I see a fair amount of coordination ...directly or indirectly they are moving in tandem," Mr. Seth told reporters.
"So, I don't see any adverse impact of that (rate hike by Fed) because Reserve Bank of India, in the two previous cycles, has already taken adequate measures," he said.
On Wednesday, the US Federal Open Market Committee, on expected lines, raised the target range for federal funds rate by 75 basis points to 1.50-1.75%. It also said it would hike rates aggressively for the rest of the calendar year.
The Reserve Bank of India (RBI) turned net purchaser of the US currency in April, after it bought USD 1.965 billion from the spot market, according to RBI's monthly bulletin for June.
