The rupee strengthened by 16 paise to 73.39 against the US dollar in opening trade on Thursday supported by weak American currency and positive domestic equities.
At the interbank forex market, the domestic unit opened at 73.42 against the US dollar, gained further ground and touched 73.39 against the US dollar, registering a rise of 16 paise over its previous close.
On Wednesday, the rupee had settled at 73.55 against the US dollar.
"Inflows related to Reliance Retail stake sale helped the rupee recover from 73.80 to 73.50 intra-day in the previous session. The inflows are likely to continue ," said Abhishek Goenka, Founder and CEO, IFA Global.
Goenka further said that market participants are awaiting European Central Bank (ECB) rate decision, scheduled to be released later in the day.
"Most market participants expect the ECB to intervene verbally to talk down the currency given that the pace of recovery in the Eurozone is slowing and headline inflation has turned negative," he said adding that US jobless claims due during the day will offer further insight into the recovery in the US labour market.
The dollar index, which gauges the greenback's strength against a basket of six currencies, fell 0.09 per cent to 93.17.
On the domestic equity market front, the 30-share BSE benchmark Sensex was trading 296.82 points higher at 38,490.74, and the broader NSE Nifty advanced 79.75 points to 11,357.75.
Foreign institutional investors were net sellers in the capital market as they offloaded shares worth Rs 959.09 crore on a net basis on Wednesday, according to exchange data.