The rupee appreciated 6 paise to 73.95 against the US dollar in the opening session on Wednesday on sustained foreign fund inflows and positive development on the coronavirus vaccine front.
Traders said strong domestic equities, sustained foreign fund inflows and weak American currency also supported the rupee.
At the interbank forex market, the domestic unit opened at 73.98 against the US dollar, and gained ground to touch 73.95 against the greenback, registering a rise of 6 paise over its previous close.
On Tuesday, the rupee appreciated by 10 paise to close at a three-week high of 74.01 against the US dollar.
Traders said risk appetite increased on news that US President-elect Joe Biden plans to nominate former Federal Reserve Chairwoman Janet Yellen as Treasury Secretary.
"The news of Janet Yellen being president-elect Biden's choice for the post of treasury secretary further buoyed risk sentiment. Appointment of Yellen as treasury secretary is believed to result in greater cohesion between monetary and fiscal policies," said Abhishek Goenka, Founder and CEO, IFA Global.
Goenka further said today is the November exchange-traded currency derivatives expiry. There could be some selling on account of this.
Meanwhile, the dollar index, which gauges the greenback's strength against a basket of six currencies, was down 0.16 per cent to 92.08.
Foreign institutional investors were net buyers in the capital market as they purchased shares worth Rs 4,563.18 crore on a net basis on Tuesday, according to exchange data.
On the domestic equity market front, the 30-share BSE benchmark Sensex was trading 95.32 points higher at 44,618.34, and the broader NSE Nifty rose 35.20 points to 13,090.35.
Brent crude futures, the global oil benchmark, rose 1.27 per cent to USD 48.47 per barrel.