The rupee strengthened by 14 paise to 94.61 against the US dollar in early trade on Wednesday, supported by receding crude oil prices, a weaker US dollar and inflows of foreign funds.
Buying momentum in the domestic equities market also favoured the Indian currency even as investors awaited the outcome of the US midterm elections, according to forex traders.
In the interbank foreign exchange market, the rupee opened at 94.61 and went up to 94.50 before paring some gains to trade at 94.61 against the greenback, up 14 paise from its previous session's closing level.
The Indian currency rose 9 paise to close at 94.75 against the US dollar on Tuesday.
Meanwhile, the dollar index, which gauges the greenback's strength against a basket of six currencies, was trading at 101.17, lower by 0.54 per cent. Also, US Treasury yields declined amid expectations of a favourable outcome for the Democratic Party in the midterm elections.
Brent crude, the global oil benchmark, was trading lower by 0.49 per cent at USD 103.09 per barrel in futures trade even as geopolitical uncertainties continued.
On the domestic equity market front, Sensex surged 435.10 points or 0.57 per cent to 77,352.95 in early trade, while Nifty climbed 115.90 points or 0.49 per cent to 23,925.10. Both the indices ended over 1.5 per cent higher in the preceding session.
Foreign Institutional Investors (FIIs) remained net buyers for the third consecutive day on Tuesday and purchased equities worth Rs 6,836.81 crore, according to exchange data.