Continuing with its rising streak for the fifth day, the rupee appreciated by 6 paise in early trade on Tuesday to hit a three-week high at 46.39 against the US dollar, supported by firming Asian stocks.
However, dollar demand from oil refiners, restricted gains.
At the Interbank Foreign Exchange (Forex) market, the local unit strengthened by 6 paise to 46.39, highest since October 21. Yesterday, the Indian rupee ended 35 paise higher at 46.45/46.
Forex dealers said expectations of more capital inflows by foreign funds into local markets, which are likely to move upwards in tandem with other Asian markets, supported the Indian rupee.
Among the Asian bourses, Japan's benchmark Nikkei-225 index climbed 161.11 points, or 1.64 per cent, in early trade, while Hong Kong's Hang Seng index rose by 334.66 points this morning.
The BSE Sensex has notched up over 1,093 points in the past four trading sessions.