The Indian rupee strengthened by 14 paise to 74.44 against the US dollar in early trade on Tuesday, tracking a firm trend in the domestic equity market.
At the interbank foreign exchange, the domestic unit opened at 74.49 against the dollar, then inched higher to 74.44, registering a gain of 14 paise over its previous close.
On Monday, the rupee had settled at 74.58 against the US dollar.
Meanwhile, the dollar index, which gauges the greenback's strength against a basket of six currencies, was trading 0.08 percent down at 92.18 ahead of key CPI data tonight.
On the domestic equity market front, BSE Sensex was trading 240.87 points or 0.46 percent higher at 52,613.56, while the broader NSE Nifty advanced 70.30 points or 0.45 percent to 15,762.90.
Forex traders said foreign fund outflows and firm crude oil prices could weigh on investor sentiment and cap the appreciation of the local unit.
Foreign institutional investors were net sellers in the capital market on Monday as they offloaded shares worth Rs 745.97 crore, as per exchange data.
Global oil benchmark Brent crude futures advanced 0.25 percent to USD 75.35 per barrel.
On the domestic macro-economic front, retail inflation remained above the RBI's comfort level for the second consecutive month despite slipping slightly to 6.26 percent in June while the factory output recorded a growth of 29.3 percent in May, mainly on account of the base effect.
