The rupee appreciated 4 paise to 82.66 against the US dollar in early trade on Wednesday, supported by a firm trend in domestic equities ahead of the Reserve Bank of India's monetary policy decision.
However, investors remained concerned over rising crude prices in the overseas markets and persistent foreign capital outflows, forex traders said.
At the interbank foreign exchange, the domestic unit opened strong at 82.67 against the dollar, then inched higher to 82.66, a rise of 4 paise over its last close.
In early deals, it was moving in a close range of 82.66-82.67.
On Tuesday, the rupee rose 6 paise to close at 82.70 against the US dollar.
Meanwhile, the dollar index, which gauges the greenback's strength against a basket of six currencies, slipped 0.10 per cent to 103.33.
Brent crude futures, the global oil benchmark, advanced 0.18 per cent to USD 83.84 per barrel.
The Reserve Bank of India's monetary policy decision on Wednesday will be closely watched by investors for further cues and there are expectations that the repo rate will be hiked by 25 basis points.
However, economists at SBI have said they expect the RBI to hit the pause button on interest rate hike.
Meanwhile, the 30-share BSE Sensex was trading 220.75 points or 0.37 per cent higher at 60,506.79 points. The broader NSE Nifty advanced 71.35 points or 0.40 per cent to 17,792.85 points.
Foreign Institutional Investors (FIIs) were net sellers in the capital market on Tuesday as they offloaded shares worth Rs 2,559.96 crore, according to exchange data.