The rupee strengthened by 20 paise to trade at 55.32 against the US dollar in early trade on Tuesday, extending its rising streak for the third day at the Interbank Foreign Exchange on increased capital inflows and a stronger euro.
Selling of the American currency by exporters also supported the rupee.
Forex dealers said continued capital inflows and euro's gains against the dollar overseas on hopes that the European Central Bank may take action soon to ease the continent's debt crisis, kept the rupee's sentiment firm.
The rupee had gained 23 paise to close at 55.52 a dollar on Monday.