Rupee strengthened by 14 paise to 66.52 against the US dollar in early trade on fresh selling of the American currency by exporters.
Besides, the dollar's weakness against some currencies overseas supported the rupee, dealers said.
However, fresh foreign fund outflows and a lower opening in the domestic equity market restricted rupee's gain.
The rupee had dropped 20 paise against the US dollar to end at 66.66 against the greenback on Wednesday on persistent dollar demand from banks and importers amid fresh foreign capital outflows.
Meanwhile, the benchmark BSE Sensex was trading lower by 92.50 points, or 0.37 per cent, at 24,808.13 in early trade on Thursday.