The rupee yesterday settled at 62.44 against the dollar, up 31 paise over the previous close.
"The RBI is closely and continuously monitoring liquidity conditions and will take actions as appropriate, including open market operations, to ensure that adequate liquidity is available to support the flow of credit to productive sectors of the economy," the central bank said in a statement.
Traders said dollar selling by exporters and banks and the RBI plans to take more steps such as bond purchases to ensure adequate supply of money for credit flows, helped domestic currency to strengthen.
Meanwhile, the BSE benchmark Sensex was up 40.93 points to 19,897.17 in early trade.