The rupee gained 16 paise to 82.25 against the US dollar in early trade on Wednesday as weakness of the American currency in the overseas market and steady foreign fund inflows supported investors' sentiment.
However, a surge in crude oil prices capped sharp gains for the local unit, forex traders said.
At the interbank foreign exchange, the domestic unit opened at 82.29, then touched a high of 82.25 against the American currency, registering a rise of 16 paise over its last close.
On Tuesday, the rupee had settled at 82.41 against the dollar.
Softness in the US dollar and sustained FII inflows supported the rupee, forex traders said adding that the strength in crude oil prices remains a concern for the rupee, as a sharp surge in prices could limit its gains.
The dollar index fell 0.30 per cent to 101.42.
Brent crude futures, the global oil benchmark, rose 0.20 per cent to $79.56 per barrel.
Traders said investors are awaiting key inflation data release from the US and India for further cues.
In the domestic equity market, BSE Sensex was trading 40.49 points or 0.06 per cent higher at 65,658.33. NSE Nifty advanced 5.80 points or 0.03 per cent to 19,445.20.
Foreign Institutional Investors (FIIs) were net buyers in the capital markets on Tuesday as they purchased shares worth Rs 1,197.38 crore, according to exchange data.