The rupee strengthened by four paise to 65.25 against the dollar in early trade on Tuesday on sustained selling of the US currency by exporters and banks amid firm equity markets.
Dealers said continued foreign fund inflows and selling of dollar by exporters supported the rupee.
The dollar, however, was firm against major Asian currencies which restricted the rupee movement, they added.
The rupee had risen by 22 paise to close at seven-week high of 65.29 per dollar on Monday on persistent selling of the American currency by banks and exporters amid strengthening equities.
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