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The Indian rupee strengthened by 6 paise to 74.25 against the US dollar in early trade on Tuesday, tracking weakness of the American currency in the overseas market.
At the interbank foreign exchange, the domestic unit opened at 74.28 against the dollar, then inched higher to 74.25, registering a gain of 6 paise over its previous close.
On Monday, the rupee had settled at 74.31 against the US dollar.
"Asian currencies have started flat to weaker against the greenback this Tuesday morning and could weigh on sentiments," Reliance Securities said in a research note.
Meanwhile, the dollar index, which gauges the greenback's strength against a basket of six currencies, was trading 0.08 per cent down at 92.13.
On the domestic equity market front, BSE Sensex was trading 33.57 points or 0.06 per cent higher at 52,913.57, while the broader NSE Nifty advanced 22.40 points or 0.14 per cent to 15,856.75.
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 338.43 crore, as per exchange data.
Global oil benchmark Brent crude futures rose 0.41 per cent to USD 77.48 per barrel.
