At 9.06 a.m., the partially convertible rupee was at 55.00/01 to the dollar versus its 55.31/32 close on Monday.
The currency gained 43 paise against the US dollar in early trade at the Interbank Foreign Exchange as the American currency weakened against euro and other currencies overseas.
Dollar selling by exporters and banks, amid a higher opening in the domestic equity market also supported the rupee, dealers said.
Euro rose against the US dollar overseas after the International Monetary Fund said it was releasing 1.48 billion euros ($1.82 billion) in new funds to troubled Portugal.
Meanwhile, the BSE benchmark index Sensex recovered by 130.62 points, or 0.76 per cent, to 17,233.93.