Extending its gains for the third straight day, the Indian rupee today appreciated by seven paise to 49.85 against the US currency in early trade owing to increased capital inflows by foreign funds on expectations that the domestic bourses may open in the positive zone, tracking other Asian equity markets.

Dollar's weakness against other Asian currencies also supported the rupee, dealers said. At the Interbank Foreign Exchange (Forex) market, the domestic unit was quoted higher at 49.85 a dollar, up by seven paise over the previous close of 49.92/94.