Continued capital inflows also aided the sentiment. FIIs bought shares worth USD 573.67 mln on first four days of the week, as per Sebi data.
At the Interbank Foreign Exchange (Forex) market, the domestic unit commenced better at 60.02 a dollar from last weekend's close of 60.08 and moved in a wide range of 59.52 and 60.2650 before settling the week at 59.72, revealing a rise of 36 paise or 0.60 per cent.
The Indian benchmark S&P BSE Sensex flared up by 862.14 points or 3.43 per cent, which mainly gave a support to the rupee rise.
Pramit Brahmbhatt, Veracity Group CEO, said, "Rupee continued to gain for the second consecutive week on the FIIs buying. The overseas investors bought shares worth of Rs 4,000 crores. The positive sentiment in the market has lifted the confidence of the investors as recent better than expected US economic data has revived the economy which sparked the global equities to trade higher.
"The trading range for the Spot USD/INR pair is expected to be within 59.40 to 60.40".
"Last week we witnessed FIIs buying throughout the week. Investors are being optimistic about the budget and are expecting some business friendly policies which will attract more overseas investors. In the anticipation of a good budget last week FIIs have poured Rs 5,327 crore which helped local equities to trade higher and post new all time high.
"After falling for three weeks, last week indices posted its first weekly gain in four weeks. Also the better than expected US economic data boosted the world stocks to trade positively."