The rupee appreciated 8 paise to 74.82 against the US dollar in early trade on Tuesday tracking weakness in the greenback and gains in the domestic equity market.
The local unit opened at 74.83 against the US dollar, then touched 74.82, up 8 paise over its previous close of 74.90 against the American currency.
Meanwhile, the dollar index, which gauges the greenback's strength against a basket of six currencies, fell 0.06 per cent to 93.52.
Forex traders said, gains in the domestic currency were supported by foreign fund inflows into domestic equity and debt markets.
Foreign institutional investors were net buyers in the capital market as they purchased shares worth Rs 302.88 crore on Monday, according to provisional exchange data.
Market participants will track Index of Industrial Production (IIP) number scheduled to be released later in the day for further cues, they said.
"Asian currencies were trading stronger against the US dollar this morning and could lend support. However, worsening strains between Washington and Beijing over Hong Kong could limit the appreciation bias in currencies," Reliance Securities said in a research note.
Meanwhile, the 30-share BSE benchmark Sensex was trading 324.51 points higher at 38,506.59 and the broader NSE Nifty rose 84 points to 11,354.15.
Brent crude futures, the global oil benchmark, rose 0.47 per cent to USD 45.20 per barrel.
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