The rupee hits 60.90 in opening trade, its highest since 23 September. The pair is trading at 60.96/97 versus Monday's 61.0950/1050.
India's retail inflation in September hits record low, but rate cuts still unlikely.
The pair will move in 60.90 to 61.20 range.
Traders expect caution to prevail ahead of the Maharashtra state election on Wednesday.
Most Asian currencies are also trading stronger compared to the dollar.
Nifty is trading 0.5% higher and will be watched for clues on foreign fund flows.