Rising for the fourth straight session, the rupee appreciated by 7 paise to close at 73.42 (provisional) against the US dollar on Tuesday, tracking weakness in the American currency and positive domestic equities.
The sustained foreign fund inflows also supported the rupee, traders said.
At the interbank forex market, the domestic unit opened at 73.42 against the US dollar and witnessed an intra-day high of 73.34 and a low of 73.44.
The local unit finally settled at 73.42 against the American currency, registering a rise of 7 paise over its previous close.
On Monday, the rupee had settled at 73.49 against the US dollar.
Meanwhile, the dollar index, which gauges the greenback's strength against a basket of six currencies, fell 0.32 per cent to 90.04.
On the domestic equity market front, BSE Sensex ended 259.33 points or 0.55 per cent higher at 47,613.08, while the broader NSE Nifty jumped 59.40 points or 0.43 per cent to 13,932.60.
Foreign institutional investors were net buyers in the capital market as they purchased shares worth Rs 1,588.93 crore on a net basis on Monday, according to provisional exchange data.
Brent crude futures, the global oil benchmark, rose 1.24 per cent to $51.49 per barrel.