The Indian rupee strengthened by 18 paise to 74.43 against the US dollar in early trade on Thursday, tracking positive domestic equities.
At the interbank foreign exchange, the domestic unit opened at 74.46 against the dollar, then inched higher to 74.43, registering a gain of 18 paise over its previous close.
On Tuesday, the rupee had settled at 74.61 against the US dollar.
Forex market was closed on Wednesday on account of 'Bakri Id'.
Meanwhile, the dollar index, which gauges the greenback's strength against a basket of six currencies, was trading 0.01 per cent up at 92.76.
The rupee opened stronger on Thursday as the dollar eased and risk appetite improved, Reliance Securities said in a research note.
The recovery in US equities suggests that investors believe that the economic impact of the coronavirus is likely to be quite limited.
Furthermore, expectations are that the increase in infection is likely to make the Federal Reserve all the more wary of removing its accommodation, the note added.
On the domestic equity market front, BSE Sensex was trading 572.74 points or 1.10 per cent higher at 52,771.25, while the broader NSE Nifty advanced 161.45 points or 1.03 per cent to 15,793.55.
Meanwhile, foreign institutional investors were net sellers in the capital market on Tuesday as they offloaded shares worth Rs 2,834.96 crore, as per exchange data.
Global oil benchmark Brent crude futures declined 0.42 per cent to USD 71.93 per barrel.