The rupee was at 81.52 per dollar by 0455 GMT, having risen to 81.49 momentarily. It closed at 81.63 in the previous session.
The sentiment is fairly risk-positive, but there will be a lot of dollar-buying orders near 81.50-levels, with importers trying to hedge, said a trader at a private bank.
The rupee's trend is of a rangebound movement, and it is unlikely to appreciate further sharply, the trader added, saying that the 81.40-81.45 zone may hold in the near term.
The currency has moved in an extremely narrow 81.50-81.90 per dollar range this week, despite the greenback's tumble, to underperform its Asian peers.
If it holds the day's gains, the rupee will be on track to appreciate 0.2% this week. In contrast, the Malaysian ringgit, the South Korean won, and the Thai baht are eyeing a rise of about 2.2%, 1%, and 0.4% for the week, respectively.
The dollar index extended losses to fall near a three-month low of 105.750 on the prospect of the Federal Reserve slowing monetary policy tightening from as soon as December. [FRX/]
The index is down 5.5% this month alone.
Futures currently show an 80% probability that the Fed will now switch to a 50-basis-point (bps) hike in December.
Meanwhile, foreign investors have pumped more than $3 billion into Indian equities so far this month, supporting the rupee. India's BSE Sensex stock index touched a record high on Thursday.
(Reporting by Anushka Trivedi in Mumbai; Editing by Janane Venkatraman)
By Anushka Trivedi
