The rupee gained 21 paise to 82.62 against the US dollar in early trade on Thursday supported by broad dollar weakness and a firm trend in domestic equities.
Forex traders said upbeat domestic trade deficit data and foreign fund inflows supported investor sentiments.
At the interbank foreign exchange, the domestic unit opened at 82.72 against the dollar, then gained ground and touched 82.62, registering a rise of 21 paise over its previous close.
On Wednesday, the rupee settled at 82.83 against the US dollar.
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Meanwhile, the dollar index, which gauges the greenback's strength against a basket of six currencies, fell 0.25 per cent to 103.66.
Brent crude futures, the global oil benchmark, rose 0.50 per cent to USD 85.81 per barrel.
In the domestic equity market, the 30-share BSE Sensex was trading 391.48 points or 0.64 per cent higher at 61,666.57. The broader NSE Nifty advanced 113.90 points or 0.63 per cent to 18,129.75.
India's trade deficit in January fell to a 12-month low of USD 17.75 billion as imports declined 3.63 per cent year-on-year to USD 50.66 billion. Exports in January dipped 6.58 per cent to USD 32.91 billion, as against USD 35.23 billion a year ago.
Foreign Institutional Investors (FIIs) were net buyers in the capital market on Wednesday as they purchased shares worth ₹432.15 crore, according to exchange data.