The rupee strengthened by 11 paise to Rs 48.94 a dollar in early trade on the Interbank Foreign Exchange market on Tuesday on increased foreign capital inflows.
Dealers said rupee gained due to foreign capital inflows and dollar's fall against major world currencies overseas.
The rupee had depreciated by 36 paise against the US currency to close at Rs 49.05/06 in the previous session.
Meanwhile, the BSE benchmark index Sensex rose by 121.65 points, or 0.68 per cent, to 17,828.71 in early trade.