The rupee rose 27 paise or 0.36% to close at 75.64 against the US dollar on Tuesday as initial success in coronavirus vaccine trial boosted investor sentiment globally.
Forex traders said besides the encouraging results in covid-19 vaccine trial, higher opening of domestic equities and weakening American currency supported the local unit.
On Monday, the rupee had closed at 75.91 against the US dollar. From the start of the year, Rupee has lost 5.63%.
10 Year Government Bond Yield closed at 5.77 unchanged from previous close.
The rupee closed amid improving risk appetite after encouraging data from the trial of a vaccine for covid-19. "Initial data from Moderna Inc's covid-19 vaccine showed that it produced protective antibodies in a small group of healthy volunteers," Reliance Securities said in a research note.
Moreover, optimism about resumption in economic activity could aid sentiments after shops and restaurants re-opened in Italy, while other centres of the outbreak such Spain and Portugal will gradually lift restrictions, it added.
The Indian government on Sunday extended the coronavirus lockdown for two more weeks with the fourth phase providing more relaxations outside containment zones.
The benchmark index, Sensex gained 0.86% or 256.96 to trade at 30,285.94 and broader Nifty rising 78.55 points or 0.89% to 8,988.85.
From the beginning of the year, Foreign Institutional investors (FII) were net sellers in the capital market, as they offloaded equity shares worth $5.04 billion and Domestic Institutional investors (DII) have net buyers of ₹75994.96 crore of Indian equities.
The dollar index, which gauges the greenback's strength against a basket of six currencies, was trading 0.02% down at 99.64.
Brent crude futures, the global oil benchmark, rose 0.34% to $ 34.93 per barrel.
(With PTI inputs)