The Indian rupee gained a marginal three paise in early trade on Friday on capital inflow by foreign funds on expectation that the domestic markets may open strong, in tandem with other Asian bourses.
However, a weak basket of Asian currencies against the greenback, capped gains.
At the Interbank Foreign Exchange (forex) market, the domestic currency gained three paise to quote at 48.16 over yesterday's close of 48.19/20.
The local unit had dropped six paise against the American currency due to persistent fall in local stocks on fears of capital outflow from foreign funds yesterday.
Forex dealers said anticipation of the markets to open strong buoyed the rupee sentiment.
After a brief rebound on news of negative inflation, the BSE Sensex fell again, losing yet another 257.31 points or 1.77 per cent to settle the day at 14,265.53 from its previous close.