The rupee appreciated 37 paise to 81.30 against the US dollar in early trade on Tuesday as the American currency retreated from its elevated levels.
At the interbank foreign exchange, the domestic unit opened at 81.45 against the dollar, then touched 81.30, registering a gain of 37 paise over its previous close.
On Monday, the rupee plunged 58 paise to close at an all-time low of 81.67 against the dollar.
According to Sriram Iyer, Senior Research Analyst at Reliance Securities, the rupee appreciated against the greenback as the dollar took a breather.
According to experts, the focus will now shift to RBI's meeting this week, with its decision due on Friday.
"Most Asian and emerging market peers have started mixed, but a positive start in the equity futures could aid sentiments. The dollar index was marginally weaker, while the Euro, Sterling and the Yen strengthened against the greenback in this Tuesday morning trade," Iyer said.
Meanwhile, the dollar index, which gauges the greenback's strength against a basket of six currencies, fell 0.36 per cent to 113.69.
Brent crude futures, the global oil benchmark, rose 0.57 per cent to $84.54 per barrel.
In the domestic equity market, the 30-share BSE Sensex was trading 176.91 points or 0.31 per cent up at 57,322.13 and the broader NSE Nifty rose 55.95 points or 0.33 per cent to 17,072.25.
Foreign Institutional Investors (FIIs) were net sellers in the capital markets as they offloaded shares worth ₹5,101.30 crore on Monday, according to exchange data.