The rupee extended its upward momentum, rising 35 paise to 95.64 against the US dollar in early trade on Tuesday, driven by lower crude oil prices amid easing geopolitical tensions.
Forex traders said a weak US dollar index and positive equity market sentiment further boosted the Indian currency.
At the interbank foreign exchange, the rupee opened at 95.75 and gained further to trade at 95.64 against the greenback, up 35 paise from its previous closing level.
The rupee appreciated sharply by 54 paise to close at 95.99 against the US dollar on Monday, after rising 20 paise in the preceding session on Friday.
Meanwhile, the dollar index, which gauges the greenback's strength against a basket of six currencies, was trading down 0.06 per cent at 101.31.
Brent crude, the global oil benchmark, was trading 1.43 per cent lower at USD 87.10 per barrel in futures trade.
Analysts said oil prices eased as the US and Iran refrained from attacking each other's targets for the third consecutive day and mediators achieved progress in getting both sides back to negotiations.
US President Donald Trump said Iran had asked for more discussions, reaching out directly "because we've been hitting them very hard." Iran has said there are no direct talks underway.
On the domestic equity market front, Sensex rose 14.66 points, or 0.02 per cent, to 76,850.44, while the Nifty was up 27.10 points, or 0.11 per cent, to 24,023.45.
Foreign Institutional Investors offloaded equities worth Rs 1,688.23 crore on a net basis on Monday, according to exchange data.
