The rupee appreciated by 14 paise to 70.90 against the US dollar in early trade on Thursday as indications of a earlier than expected US-China trade deal strengthened investor sentiments.
Forex traders said investor confidence improved after US President Donald Trump said that trade deal with China could happen sooner than expected.
At the interbank foreign exchange the rupee opened at 70.99, then gained further ground and touched a high of 70.90, registering a rise of 14 paise over its previous close.
On Wednesday, rupee had settled for the day marginally down by 3 paise at 71.04 against the US dollar.
The domestic unit however could not hold on to the gains and was trading at 70.95 against the dollar at 1008 hrs.
Besides, higher opening in domestic equities supported the local unit, traders said.
Domestic bourses opened on a positive note on Thursday with benchmark indices Sensex trading 364.54 points higher at 38,958.06 and Nifty up 111.55 points at 11,551.75.
Moreover, weakening of the American currency vis-a-vis other currencies overseas also supported the rupee.
The dollar index, which gauges the greenback's strength against a basket of six currencies, fell 0.17 per cent to 98.86.
Market participants, however, said sustained foreign fund outflows and rising crude oil prices weighed on the local currency.
Foreign institutional investors (FIIs) remained net sellers in the capital market, pulling out Rs 342.40 crore on Wednesay, according to provisional exchange data.
Brent crude futures, the global oil benchmark, rose 0.02 per cent to trade at USD 62.40 per barrel.
The 10-year government bond yield was at 6.75 per cent in morning trade.