The rupee gained 43 paise to trade at 54.88 against the US dollar in early trade today 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 (USD 1.82 billion) in new funds to troubled Portugal.
The rupee yesterday lost 16 paise to close at 55.31 against the American currency tracking a weak stock market amid fresh demand of the American currency from importers.
Meanwhile, the BSE benchmark index Sensex recovered by 130.62 points, or 0.76 per cent, to 17,233.93.