The rupee appreciated by 18 paise to 73.07 against the US dollar in opening trade on Tuesday supported by positive domestic equities.
At the interbank forex market, the local unit opened at 73.16 against the US dollar, then inched higher to 73.07 against the greenback, registering a rise of 18 paise over its previous close.
On Monday, the rupee had settled at 73.25 against the American currency.
On the domestic equity market front, the 30-share BSE benchmark Sensex was trading 372.32 points higher at 50,813.39, and the broader NSE Nifty advanced 107.25 points to 15,064.15.
Meanwhile, the dollar index, which gauges the greenback's strength against a basket of six currencies, rose 0.02 per cent to 92.33.
"The US dollar rose against the basket of currencies this Tuesday morning in Asian trade supported by higher bond yields and expectations of faster economic normalisation from the pandemic in the United States," Reliance Securities said in a research note.
However, higher crude oil prices and strong American currency could limit the appreciation bias in the local unit, traders said.
Brent crude futures, the global oil benchmark, rose 0.78 per cent to USD 68.77 per barrel.
Foreign institutional investors were net sellers in the capital market as they offloaded shares worth Rs 1,494.49 crore on Monday, according to exchange data.