The rupee stayed on upward track for the third straight session and rose 6 paise to 83.08 against the US dollar in early trade on Tuesday amid a weak american currency and favourable crude oil prices.
A positive cue from domestic equity markets and sustained buying by foreign institutional investors also supported the Indian currency, forex traders said.
At the interbank foreign exchange, the domestic currency opened strong at 83.07 and rose to the level of 83.04 against dollar in initial deals. The local unit then traded at 83.08 against the greenback, registering a rise of 6 paise from its previous close.
The domestic currency settled 1 paisa higher at 83.14 on Monday, a day after gaining 9 paise on Friday.
Analysts said investors will keep a close watch on domestic inflation numbers as well as the data from the US to be released later this week.
Meanwhile, the dollar index, which gauges the greenback's strength against a basket of six currencies, was trading 0.07 per cent lower at 101.85 on Monday.
Brent crude futures, the global oil benchmark, rose 0.33 per cent to USD 76.37 per barrel.
In the domestic equity market, 30-share benchmark Sensex was trading 463.29 points, or 0.65 per cent, higher at 71,818.51 points. The broader Nifty surged 146 points, or 0.68 per cent, to 21,659 points.
Exchange data showed that foreign institutional investors (FIIs) bought shares worth Rs 16.03 crore on Monday, a day after purchasing equities worth Rs 1,696.86 crore in the preceding session.