On Tuesday, the Indian rupee touched its one-month high of 70.73 against the US dollar, a level last seen on 1 October. The domestic currency opened at 70.74/ dollar, 0.24 percent higher than Friday's close of 70.89.
Markets in India were closed on Money on account of Diwali Balipratipada.
The gains were reflective of a similar trend seen among Asian currencies on account of trade optimism globally. The rupee also strengthens when Indian markets trade higher and oil prices ease.
BSE's Sensex rose 0.19 percent to 39,322 and the NSE's Nifty 50 was up by 0.15 percent to 11,644 from their previous closes.
The Asian stocks were at their three-month high on Tuesday on Wall Street's record gains over hopes of progress in US-China trade negotiations and another dose of policy stimulus from the Federal Reserve this week. S&P 500 hit a record high on Monday (US time), while the Nasdaq fell just short of its lifetime high seen in late July.
Oil prices were dim on Tuesday after a dip seen on Monday as concerns of slower economic growth revived after China's economic data showed the second-straight month of decline in profits of Chinese industrial companies. Investors now await US inventory data.
Other Asian currencies were also trading higher. South Korean won was up by 0.29 percent, Philippines peso 0.13 percent, China Renminbi 0.11 percent, China Offshore 0.07 percent, Malaysian ringgit 0.05 percent but the Singapore dollar and Japanese yen were down by 0.04 percent each.