The rupee today strengthened by 16 paise to 54.25 against the dollar in early trade at the Interbank Foreign Exchange on fresh selling of the US currency by exporters, amid sustained foreign capital inflows.

Besides a higher opening in the domestic equity market also aided the local currency, forex dealers said.

The rupee had lost 13 paise to close at 54.41 against the dollar yesterday.

Meanwhile, the BSE benchmark index Sensex recovered by 35.67 points, or 0.18 per cent, to 19,681.88 in early trade today.