The rupee appreciated 7 paise to 74.26 per dollar in early trade on Wednesday's opening trade, supported by foreign fund inflows and optimism surrounding trade the deal between the US and China.
The local unit opened at 74.34 per dollar and gained ground to touch 74.26, up 7 paise over its previous close, of 74.33 against the US currency, even as the domestic equity market was trading in the negative territory.
"Investors will closely monitor the yuan to see if the Chinese currency continues to appreciate against the US dollar amid a wave of optimism after Washington and Beijing affirmed their trade deal," Reliance Securities said in a research note.
The dollar index also held muted against a basket of major Asian currencies, as investors awaited US central bank speech from Federal Reserve Chairman Jerome Powell, scheduled on Thursday.
Meanwhile, foreign institutional investors were net buyers in the capital market as they purchased shares worth Rs 1,481.20 crore on Tuesday, according to provisional exchange data.
On the equity front, the S&P BSE Sensex was trading 34 points lower at 38,809. The Nifty 50 index, on the other hand, gained mere 1 point to 11,474.
Oil price continued to move higher as US producers shut most output in the Gulf of Mexicao ahead of Hurricane Laura. Brent crude futures, the global oil benchmark, rose 0.35 per cent to USD 46.02 per barrel.
In India, the death toll touched 59,612 and total coronavirus cases reached 32.34 lakh as of Tuesday. Worldwide, there were 240 lakh confirmed cases and 8.23 lakh deaths from COVID-19 outbreak.