The rupee appreciated by 21 paise to 72.90 against the US dollar in opening trade on Monday supported by sustained foreign fund inflows and weakness of the American currency in the overseas market.
Traders said hopes of Covid-19 vaccine also improved sentiments.
India's drugs regulator on Sunday approved Oxford Covid-19 vaccine Covishield, manufactured by the Serum Institute, and indigenously developed Covaxin of Bharat Biotech for restricted emergency use in the country, paving the way for a massive inoculation drive.
At the interbank forex market, the domestic unit opened at 72.93 against the US dollar and inched higher to 72.90 against the greenback, registering a rise of 21 paise over its previous close.
On Friday, the rupee had settled at 73.11 against the American currency.
Meanwhile, the dollar index, which gauges the greenback's strength against a basket of six currencies, fell 0.24 per cent to 89.72.
"An improving global economic outlook as Covid-19 vaccines are rolled out, rock-bottom US interest rates and ongoing Fed bond purchases have dented the dollar''s appeal," Reliance Securities said.
Further, "most Asian currencies were trading stronger against the greenback this morning and could lend support to the domestic unit," it added.
On the domestic equity market front, the benchmark BSE Sensex and the broader NSE index touched fresh record-high levels in early deals. The 30-share BSE benchmark Sensex was trading 224.28 points higher at 48,093.26, and the broader NSE Nifty was up 74.85 points at 14,093.35.
Foreign institutional investors were net buyers in the capital market as they purchased shares worth Rs 506.21 crore on a net basis on Friday, according to provisional exchange data.
Brent crude futures, the global oil benchmark, advanced 1.06 per cent to USD 52.35 per barrel.
