The rupee strengthened by 23 paise to Rs 54.83 against the US dollar in early trade today at the Interbank Foreign Exchange on sustained dollar selling by exporters and banks amid sustained foreign capital inflows.
A higher opening in the domestic equity market supported the rupee, dealers said.
They, however, said, dollar's strength against the euro following the decision by Moody's to downgrade French debt capped the rupee's rise.
Rupee had recovered by 10 paise to close at 55.06 against the dollar yesterday on dollar selling by exporters amid weakness in the American currency in international markets.
Meanwhile, the BSE benchmark index Sensex rose by 116.29 points, or 0.63%, to 18,455.29 in opening trade today.