The rupee firmed up 9 paise to 68.56 against the dollar in early trade on Wednesday, rising for the second straight day on increased selling of the US currency by exporters and banks.
Forex dealers said a higher opening in the domestic equity market and expectations of encouraging gross domestic product (GDP) data to be released later in the day, also supported the rupee.
However, the US dollar's strength against some currencies overseas -- following stronger-than-expected third-quarter (Q3) US growth data, higher housing prices in September and a sharp rebound in consumer confidence in November -- capped the gains.
The rupee had staged a modest recovery from its fresh 2016 low by gaining 11 paise against the US greenback to end at 68.65 in Tuesday's trade.
Meanwhile, the benchmark BSE Sensex rose 90.06 points, or 0.34%, to 26,484.07 in early trade on Wednesday.
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