The rupee strengthened by 35 paise to 61.35 against the dollar in early trade on Friday at the Interbank Foreign Exchange on strong selling of the US currency by exporters amid sustained capital inflows.
Forex dealers said besides selling of the American currency by exporters, continued overseas capital inflows and soaring domestic equity markets supported the rupee.
They said, however, euro sinking to its lowest level in more than a decade against the US dollar after the ECB announced stimulus programme capped the rupee's gains.
The Indian rupee had lost seven paise against the dollar at 61.70 in Thursday's trade due to fresh demand for the US currency from banks and importers.
Meanwhile, the benchmark BSE Sensex rose sharply by 383.16 points, or 1.31 per cent, to hit yet another record high of 29,389.18 in opening trade.