The rupee appreciated by 26 paise to 69.40 against the US dollar in opening trade on Thursday, as counting of votes for the seven-phase Lok Sabha elections began across the country.
The counting exercise is on in over 4,000 counting centres. Most of the exit polls have predicted that the BJP-led National Democratic Alliance (NDA) is on course to retain power for a second term.
The rupee opened strong at 69.45 at the interbank forex market, then gained further ground and touched 69.40, displaying gains of 26 paise over its last close.
The rupee had settled at 69.66 against the US dollar on Wednesday.
Forex traders said, besides the Lok Sabha election outcome, easing crude prices and higher opening in domestic equities also supported the rupee.
Foreign fund outflows however dampened the sentiment of forex traders.
Foreign institutional investors (FIIs) were net sellers in the capital markets, pulling out Rs 965.02 crore on Wednesday, according to provisional exchange data.
Brent crude futures, the global oil benchmark, eased 0.58% to $70.58 per barrel.
Domestic bourses opened on a bullish note Thursday with both benchmark indices Sensex and Nifty hitting all-time highs.
The 30-share Sensex was trading at 39,722.15 points, up 611.94 points while Nifty was trading higher by 226.80 points at 11,964.70.