The Indian rupee appreciated by 12 paise at 48.51 against the US dollar in early trade today, extending yesterday's gains, largely on hopes of increased capital inflows by foreign funds as markets may open notably higher in line with firming Asian bourses.
Dollar selling by exporters and weak US currency overseas also supported the Indian unit.
At the Interbank Foreign Exchange (Forex) market, the domestic unit was quoted higher at 48.51 a dollar, a gain of 12 paise over the previous close of 48.63/64. Yesterday's rupee gained 33 paise.
Forex dealers said the rupee continued to draw support from a sharp rally in local stocks and weakness in the dollar against other currencies in global markets.
The Indian benchmark Sensex had gained over 850 points in the past two sessions.