The rupee rose by 7 paise to 82.73 against the US dollar on Wednesday amid positive sentiment in the equity markets.
Rising crude oil prices and a strengthening dollar, however, weighed on the Indian currency, according to forex traders.
At the interbank foreign exchange, the domestic unit opened stronger at 82.67 and hit the level of 82.74 against the greenback.
Later, the rupee was trading at 82.73 against the dollar, registering a gain of 7 paise from its previous close.
On Tuesday, the rupee closed at 82.80 against the US dollar.
"Yesterday, in the latter part of the day, dollar fell sharply and that led to gains not only in major crosses but also in commodities," Gaurang Somaiya, Forex and Bullion Analyst at Motilal Oswal Financial Services, said.
On the domestic front, GDP numbers will be important to watch, and better-than-expected numbers could support the rupee, he said. GDP numbers are scheduled to be released on Thursday.
Meanwhile, the dollar index, which gauges the greenback's strength against a basket of six currencies, rose 0.08 per cent to 103.61.
Brent crude futures, the global oil benchmark, rose 0.33 per cent to $85.77 per barrel.
In the domestic equity market, the 30-share BSE Sensex was trading 291.53 points or 0.45 per cent higher at 65,367.35 points. The broader NSE Nifty advanced 78.20 points or 0.40 per cent to 19,420.85 points.
Foreign Institutional Investors (FIIs) were net buyers in the capital markets on Tuesday as they bought equities worth Rs 61.51 crore, according to exchange data.