The rupee appreciated 10 paise to 86.71 against the US dollar in early trade on Tuesday, tracking its Asian peers and supported by positive domestic equities.
Forex traders said the sharp upside for the local unit was restricted as investors grappled with the potential economic impact of growing global trade concerns.
At the interbank foreign exchange, the rupee opened at 86.71 against the greenback, up 10 paise from its previous close.
On Monday, the rupee had appreciated 24 paise to close at 86.81 against the US dollar.
Asian currencies gained slightly as CNH rose to 7.2338, IDR was at 16395 and KRW at 1445.
Fears that US President Donald Trump's aggressive tariff policies could trigger a broader economic slowdown have undermined the greenback, said Anil Kumar Bhansali, Head of Treasury and Executive Director Finrex Treasury Advisors LLP.
Meanwhile, the US dollar index, which gauges the greenback's strength against a basket of six currencies, was trading 0.19 per cent higher at