The Indian rupee appreciated by 11 paise to 71.74 against the US dollar in early trade on Wednesday.
At the interbank foreign exchange the rupee opened at 71.76 and touched a high of 71.74, registering a rise of 11 paise over its previous close.
On Tuesday, rupee had settled for the day at 71.85 against the US dollar.
The domestic unit, however, could not hold on to the gains and was trading at 71.78 against the dollar at 1002 hrs.
Meanwhile, investor sentiment remained fragile amid concerns over the impact of coronavirus outbreak on global economy, forex traders said.
The death toll in China's novel coronavirus epidemic on Wednesday climbed to 2,715 with 52 new fatalities while the confirmed cases rose to 78,064.
Domestic bourses opened on a muted note on Wednesday with benchmark indices Sensex trading 275.11 points lower at 40,006.09 and Nifty down 85.30 points at 11,712.60.
Foreign institutional investors (FIIs) remained net sellers in the capital market, as they sold shares worth Rs 2,315.07 crore on Tuesday, according to provisional exchange data.
Rising crude oil prices and strengthening of the American currency vis-a-vis other currencies overseas weighed on the rupee, traders said.
Brent crude futures, the global oil benchmark, rose 0.44 per cent to trade at 55.19 per barrel.
The dollar index, which gauges the greenback's strength against a basket of six currencies, rose by 0.13 per cent to 99.09.
The 10-year government bond yield was at 6.32 per cent in morning trade.