The rupee appreciated 21 paise to 75.30 against the US dollar in early trade on Wednesday as Prime Minister Narendra Modi's Rs 20 lakh crore economic stimulus package enthused investors.
Forex traders said PM's economic booster aided sentiments. Besides, a positive opening in domestic equities also supported the local unit.
At the interbank foreign exchange, the rupee opened at 75.31, then gained ground to touch 75.30, registering a rise of 21 paise over its previous close.
On Tuesday, the rupee had settled at 75.51 against the US dollar.
In a big push to revive the COVID-hit economy, Prime Minister Narendra Modi on Tuesday announced massive new financial incentives on top of the previously announced packages for a combined stimulus of Rs 20 lakh crore.
Domestic bourses were trading on a positive note on Wednesday with the benchmark Sensex up 691.49 points at 32,062.61 and broader Nifty rising 195.80 points to 9,392.35.
Foreign institutional investors were net sellers in the capital market, as they offloaded equity shares worth Rs 1,662.03 crore on Tuesday, according to provisional exchange data.
Meanwhile, the dollar index, which gauges the greenback's strength against a basket of six currencies, was trading 0.07 per cent up at 100.
However, traders said investor sentiment remains fragile amid concerns over the impact of COVID-19 pandemic on the domestic as well as global economy.
In India, the death toll due to COVID-19 rose to 2,415 and the number of cases climbed to 74,281 on Wednesday, according to the health ministry.
The number of cases around the world linked to the disease has crossed over 42.62 lakh and the death toll has topped 2.91 lakh.
Meanwhile, Brent crude futures, the global oil benchmark, fell 1.47 per cent to USD 29.54 per barrel.