The rupee appreciated 9 paise to 82.69 against the US dollar in early trade on Tuesday, as crude oil price retreated from its elevated levels.
Forex traders said sustained foreign fund outflows weighed on investor sentiments and restricted the appreciation bias.
At the interbank foreign exchange, the domestic unit opened at 82.69 against the dollar, registering a rise of 9 paise over its previous close.
On Monday, the rupee declined 17 paise to close at 82.78 against the US dollar.
Meanwhile, the dollar index, which gauges the greenback's strength against a basket of six currencies, rose 0.03 per cent to 103.55.
Brent crude futures, the global oil benchmark, declined 0.30 per cent to USD 85.65 per barrel.
"India December Manufacturing PMI came in at 57.8 against 55.7 in November. This shows that economy is still resilient as has also been evident from other high frequency indicators such as car sales and core sector data," IFA Global Research Academy said in a research note.
The rupee is likely to trade in a 82.55-82.85 range with sideways price action, it added.
In the domestic equity market, the 30-share BSE Sensex was trading 24.82 points or 0.04 per cent lower at 61,142.97. The broader NSE Nifty fell 5.25 points or 0.03 per cent to 18,192.20.
Foreign Institutional Investors (FIIs) were net sellers in the capital markets on Monday as they offloaded shares worth Rs 212.57 crore, according to exchange data.