Mumbai, Oct 6 (PTI) Rupee rose five paise to 88.74 against the US dollar in early trade on Monday, tracking a positive trend in domestic equities and likely IPO-related inflows.

Forex traders said the rupee is trading in a tight range as it remains under pressure due to continued capital outflows and geopolitical developments.

At the interbank foreign exchange market, the rupee opened at 88.75 against the US dollar, then inched up to 88.74, registering a gain of five paise from its previous close.

On Friday, the rupee depreciated eight paise to close at 88.79 against the US dollar.

"We are entering a new week with three major IPOs of We-Work, Tata Capital and LG, worth about Rs 31,000 crores. Inflows of these IPOs should take rupee up in the week towards 88.50 is the expectation for the day," said Anil Kumar Bhansali, Head of Treasury and Executive Director, Finrex Treasury Advisors LLP.

Bhansali further noted that "There is a continued cautious sentiment in the market as global risk factors and domestic macroeconomic data await fresh triggers for directional move of the pair, which still remains on the up." Meanwhile, External Affairs Minister S Jaishankar on Sunday said that any trade deal between India and the US must respect New Delhi's "red lines" and efforts are underway to reach an understanding.

In an interactive session at an event, Jaishankar acknowledged that there were "issues" between India and the US and many of them were linked to the inability to firm up the proposed trade deal, even as he noted that "there are things you can negotiate and there are things you can't".

The external affairs minister said both sides have not arrived at a "landing ground" on trade discussions and that an understanding is necessary as the US is the world's largest market. But at the same time, he said India's red lines should be respected.

Meanwhile, the dollar index, which gauges the greenback's strength against a basket of six currencies, was trading at 98.05, higher by 0.34 per cent.

Brent crude, the global oil benchmark, was trading 1.47 per cent higher at USD 65.48 per barrel in futures trading.

Forex traders said persistent foreign fund outflows and risk-off sentiment prevented a sharp rise in the domestic unit. Foreign institutional investors offloaded equities worth Rs 1,583.37 crore on a net basis on Friday, according to exchange data.

On the domestic equity market front, Sensex advanced 67.62 points to 81,274.79 in opening trade, while the Nifty was up 22.3 points to 24,916.55.

Meanwhile, India's foreign exchange reserves dropped by USD 2.334 billion to USD 700.236 billion during the week ended September 26, according to the RBI data on Friday.

In the previous reporting week, the kitty had declined by USD 396 million to USD 702.57 billion. PTI DRR DRR

Exchange rate pressure persists as inflows, outflows and reserve movements shape currency stability under regulatory oversight. Exchange rate movement and external sector stability are under regulatory scrutiny as the rupee appreciated marginally amid domestic equity strength and anticipated IPO inflows, while persistent foreign portfolio outflows, a stronger dollar index, and declining foreign exchange reserves constrained sharper appreciation under the framework of FEMA and RBI oversight.