The rupee on Tuesday gained 26 paise to 53.91 against the dollar in early trade at the Interbank Foreign Exchange on fresh selling of the US currency by exporters ahead of the Reserve Bank policy review.
Forex dealers said strengthening of euro against the dollar overseas on easing fears about a controversial bailout for Cyprus and a higher opening in the domestic equity market, also supported the rupee.
The local currency had lost 16 paise to close at 54.17 on Monday due to fresh dollar demand from importers and some banks.
Meanwhile, the BSE benchmark index Sensex recovered by 85.41 points, or 0.44%, to 19,378.61 in early trade on Tuesday.