The rupee appreciated 14 paise to 81.14 against the American currency in early trade on Tuesday on positive domestic macroeconomic data and easing crude oil prices.
Forex traders said sustained foreign fund inflows also supported the local unit.
At the interbank foreign exchange, the domestic unit opened at 81.18 against the dollar, then gained further ground to touch 81.14, registering a rise of 14 paise over its previous close.
On Monday, the rupee depreciated by 50 paise to close at 81.28 against the US currency.
Meanwhile, the dollar index, which gauges the greenback's strength against a basket of six currencies, rose 0.30 per cent to 106.97.
Brent crude futures, the global oil benchmark, declined 0.13 per cent to USD 93.02 per barrel.
In the domestic equity market, the 30-share BSE Sensex was trading 21.13 points or 0.03 per cent lower at 61,603.02. The broader NSE Nifty rose 3.50 points or 0.02 per cent to 18,332.65.
Foreign Institutional Investors (FIIs) were net buyers in the capital markets on Monday as they purchased shares worth Rs 1,089.41 crore, according to exchange data.
On the domestic macroeconomic front, indicating easing of the price situation, retail inflation moderated to 6.7 per cent in October while the wholesale price index-based inflation fell to a 19-month low mainly on account of subdued rates of food items.
