Sustained US dollar selling by exporters and positive cues from stocks also aided the Indian rupee sentiment, traders said.
At the Interbank Foreign Exchange (Forex) market, the domestic unit commenced slightly lower at 61.96 a US dollar from previous close of 61.93. It then touched a low of 62.09 on initial hesitancy in local equities.
However, the Indian rupee later recovered and touched a high of 61.83, before concluding at 61.84 -- a rise of nine paise or 0.15 per cent. This is the best closing since 61.81 on January 22, 2014.
Last Friday, it has shot up by 49 paise or 0.79 per cent.
Pramit Brahmbhatt, CEO, Alpari Financial Services, (India) said: "Indian rupee appreciated after FM forecast fiscal deficit at 4.6 per cent of GDP for this fiscal, lower than the 4.8 per cent target."
The government today pegged its net borrowing for 2014-15 at Rs 4.57 lakh crore, Rs 11,580 crore less than the revised estimates of the current fiscal.
The market borrowing programme is estimated to be slightly lower than expectations and that is likely to be positive for yields at least in the near-term, said Dinesh Thakkar, Chairman & Managing Director, Angel Broking.
The US dollar index was down by 0.05 per cent against its major rivals, as recent weakness in Japan equities hurt investor appetite and disappointing US data triggered concerns for a slowing economic recovery.
Meanwhile, the equity benchmark S&P BSE Sensex rose by 97.24 points. FIIs injected USD 3.09 million last Friday as per Sebi data.
"The revised FY14 fiscal deficit target at 4.6 per cent came as a relief to the markets. Large cuts in plan expenditure have helped overcome weak tax collections and increased subsidy burden in FY14," said Dipen Shah, Head Private Client Group Research, Kotak Securities.
Forward dollar premiums continued to rule steady to weak.
The benchmark six-month forward dollar premium payable in July ended lower at 237-239 paise from 238.5-240.5 paise previously.
Far forward contracts maturing in January closed stable at its last Friday's level of 482-484 paise.
The RBI fixed the reference rate for the dollar at 61.9495 and for the euro at 84.9485.
The rupee fell back slightly to 103.46 against the pound from 103.44 while improved further to 84.75 per euro from 84.79. It also strengthened to 60.67 per 100 Japanese yen from 60.82.