Indian rupee, the domestic currency appreciated 21 paise to 73.90 against the US dollar in the opening session on Tuesday, amid strong opening in domestic equities and weak American currency.
Traders also said investor risk sentiments improved amid growing hopes of an early rollout and efficacy of COVID-19 vaccines.
The domestic unit opened at 74.10 per US dollar at the interbank forex market, and gained ground to touch 73.90, rising 21 paise over its previous close.
On Monday, the rupee gained 5 paise to settle at more than two-week high of 74.11 per US dollar.
The dollar index, which gauges the greenback's strength against a basket of six currencies, was down 0.04 per cent to 92.47.
Foreign portfolio investors (FPIs) bought shares worth Rs 4,738.44 crore, while domestic institutional investors (DIIs), were net sellers to the tune of Rs 2,944.05 crore in the Indian equity market on 23 November, provisional data showed.
"Foreign fund inflows into the domestic equity markets could also help the local unit. However, these flows are being continuously mopped up by the central bank," Reliance Securities said in a research note.
On the domestic equity market front, the 30-share BSE benchmark Sensex was trading 392.99 points higher at 44,470.14, and the broader NSE Nifty rose 114.55 points to 13,041.00.
Brent crude futures, the global oil benchmark, rose 0.91 per cent to USD 46.48 per barrel. Oil price gained on expectation of better demand after recent positive vaccine news and on hopes that OPEC+ might extend deal to restrain output. Crude also gained on the back of positive vaccine news from Astra-Oxford which bolstered hopes for quick economic recovery.
Pharma major AstraZeneca said on Monday said that an interim analysis of clinical trials of its COVID-19 vaccine in the UK and Brazil showed that it was 70 per cent effective on average, becoming the third drugmaker to announce promising results to contain the deadly virus.