The rupee appreciated 8 paise to 81.60 against the US dollar in early trade on Tuesday as a firm trend in the domestic equity market boosted investor sentiments.
The local unit was helped by a weak American currency in the overseas market, according to forex dealers.
The domestic unit opened strong against the dollar at 81.58 and fell to 81.60 at the interbank foreign exchange, registering a rise of 8 paise over its previous close.
The dollar index, which measures the strength of the dollar against a basket of six currencies, fell 0.38 per cent to 106.28.
The global oil benchmark, Brent crude futures, surged 1.39 per cent to USD 84.35 per barrel.
The 30 share BSE Sensex was trading 164.06 points or 0.26 per cent higher in the domestic equity market, at 62,668. The NSE Nifty grew by 59.10 points or 0.32 per cent to 18,621. Foreign Institutional Investors FIIs were net sellers in the capital markets on Monday as they sold shares worth Rs 935.88 crore, according to exchange data.
S&P Global Ratings cut India's economic growth forecast to 7 per cent, but said domestic demand-led economy will be less affected by the global slowdown.