The rupee appreciated by 14 paise to 72.32 against the US dollar in opening trade on Wednesday supported by positive domestic equities and weakness of the American currency in the overseas market.
Forex traders said the Fed Chairman Jerome Powell's dovish statement on the US economy also boosted investor sentiment.
At the interbank forex market, the local unit opened at 72.35 against the US dollar, then inched higher to 72.32 against the greenback, registering a rise of 14 paise over its previous close.
On Tuesday, the rupee had settled at 72.46 against the American currency.
"The Indian Rupee started this Tuesday on a stronger note against the US dollar, tracking the weakness of the greenback after dovish statement from the Fed Chairman on the economy," Reliance Securities said in a research note.
Strong Asian currencies and FPI flows into the markets could also lend support, the note added.
Meanwhile, the dollar index, which gauges the greenback's strength against a basket of six currencies, fell 0.07 per cent to 90.10 amid improved risk appetite in the markets.
On the domestic equity market front, the 30-share BSE benchmark Sensex was trading 373.12 points higher at 50,124.53, and the broader NSE Nifty advanced 112.65 points to 14,820.45.
Foreign institutional investors were net sellers in the capital market as they offloaded shares worth Rs 1,569.04 crore on Tuesday, according to exchange data.
Brent crude futures, the global oil benchmark, slipped 0.40 per cent to USD 65.11 per barrel.