The rupee on Tuesday appreciated by 8 paise to 71.66 against the US dollar in early trade propelled by foreign capital inflows and gains in domestic equity market.
Easing crude oil prices and a weaker greenback in overseas markets also influenced the sentiment, forex dealers said.
At the Interbank Foreign Exchange, the rupee opened strong at 71.67, showing a rise of 7 paise over its previous closing.
The domestic unit further moved up to trade at 71.66 following strong gains in equity markets.
The rupee had closed 3 paise higher at 71.74 in the previous session.
Foreign investors continued to invest in Indian markets amid growing risk appetite for riskier assets.
FPIs remained net buyers in the capital markets, as they purchased shares worth Rs 960.90 crore on Monday, as per provisional data.
The BSE Sensex jumps over 200 points to hit record high of 41,100.82 in early trade. Similarly, the broader NSE Nifty scaled lifetime peak of 12,126.05
The dollar index, which gauges the greenback's strength against a basket of six currencies, fell 0.04 per cent to 98.28.
Meanwhile, brent crude futures, the global oil benchmark, declined 0.05 per cent to USD 63.62 per barrel.
The 10-year government bond yield was at 6.47 per cent in morning trade.
