The rupee appreciated by 10 paise to close at 73.91 against the US dollar on Wednesday as positive development on the coronavirus vaccine front enthused investor sentiment.
At the interbank forex market, the domestic unit opened at 73.98 against the greenback, and witnessed an intra-day high of 73.88 and a low of 74.02.
The local unit finally closed at 73.91 against the American currency, registering a rise of 10 paise over its previous close.
On Tuesday, the rupee had climbed 10 paise to close at 74.01 against the US dollar.
Traders said risk appetite increased on news that US President-elect Joe Biden plans to nominate former Federal Reserve chairwoman Janet Yellen as treasury secretary.
Moreover, a weak American currency in the overseas market also supported the rupee.
The dollar index, which gauges the greenback's strength against a basket of six currencies, was down 0.10 per cent to 92.13.
Foreign institutional investors were net buyers in the capital market as they purchased shares worth Rs 4,563.18 crore on Tuesday, according to exchange data.
On the domestic equity market front, the BSE Sensex ended 694.92 points or 1.56 per cent lower at 43,828.10, while the broader NSE Nifty slumped 196.75 points or 1.51 per cent to 12,858.40.
Brent crude futures, the global oil benchmark, rose 1.32 per cent to USD 48.49 per barrel.