The Indian rupee strengthened by 12 paise to 74.25 against the US dollar in early trade on Wednesday even as the domestic equity market was trading with significant losses.
Traders said the Federal Reserve Chair Jerome Powell's comments that the US central bank will not raise interest rates too quickly supported investor sentiments.
At the interbank foreign exchange, the domestic unit opened at 74.26 against the dollar, then inched higher to 74.25, registering a gain of 12 paise over its previous close.
On Tuesday, the rupee had settled at 74.37 against the US dollar.
"Fed Chairman Powell yesterday called the market by saying that Fed will not raise interest rates just on inflation and continued to say that inflation is more transitory," said Anil Kumar Bhansali, Head of Treasury, Finrex Treasury Advisors.
Bhansali further said that the USD-INR crossed the level of 74.25 on sustained buying by oil companies and this level may now act as support.
"Importers to keep buying the dips while exporters may sell either by keeping a stop loss at 74.00 or sell the upticks towards 74.50. The range for the day 74.00 to 74.50," he noted.
Global oil benchmark Brent crude futures rose 0.65 per cent to USD 75.30 per barrel.
Meanwhile, the dollar index, which gauges the greenback's strength against a basket of six currencies, was trading 0.12 per cent up at 91.86.
On the domestic equity market front, BSE Sensex was trading 128.48 points or 0.24 per cent lower at 52,460.23, while the broader NSE Nifty declined 37.15 points or 0.24 per cent to 15,735.60.
Foreign institutional investors were net sellers in the capital market on Tuesday as they offloaded shares worth ₹1,027.94 crore, as per exchange data.