The rupee appreciated by 10 paise to 71.20 against the US dollar in opening trade on Tuesday, driven by positive opening in domestic equities.
The rupee opened strong at 71.23 at the interbank forex market then gained further ground to touch 71.20 per dollar, displaying gains of 10 paise against the greenback.
On Monday, the rupee had settled at 71.30 against the US dollar.
Forex traders said positive opening in domestic equities supported the local unit, while rising crude prices, foreign fund outflows and strengthening of the American currency weighed on rupee and restricted its upmove.
The benchmark BSE Sensex was trading with gains of 420.26 points, or 0.99 per cent to quote at 41,399.88 while the NSE Nifty was trading at 12,157.55, up 126.05 points, or 1.05 per cent.
Foreign institutional investors sold equities worth Rs 184.58 crore on a net basis on Monday, according to provisional exchange data.
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Meanwhile, brent crude, the global benchmark, was trading at USD 53.95 per barrel higher by 1.28 per cent.
The dollar index, which gauges the greenback's strength against a basket of six currencies, rose by 0.02 per cent to 98.85.
The 10-year government bond yield was at 6.44 per cent in morning trade.