On Tuesday, rupee opened higher in trade at 71.33 against Monday's close of 71.55. The currency was last quoting higher at 71.27 per US dollar. The dollar is losing ground just ahead of the crucial Fed policy outcome due on December 19 as worries on the Fed rate hike attempt linger.

It is highly expected that the Fed may bring about a rate hike when the FOMC meets for the last time this year. However, traders are more interested in the overall economic outlook for the US economy for the year 2019.

The dollar index, which measures the US currency's strength against major currencies, was trading at 97.080, down 0.02% from its previous close of 97.10.

The rupee's gains provide momentum to the bond market in India and its rally brings down bond yield. The 10-year government bond yield trades lower at 7.426% from its previous close of 7.461%. Bond yields and prices move in opposite directions.

The domestic currency so far plunged by as much as 10.74% with foreign investors selling $4.44 billion and $7.34 billion in the equity and debt markets, respectively.

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