Talks of continued capital inflows also helped the rupee gain after four days of holidays but a strong dollar overseas restricted the rise to some extent, a forex dealer said.
The rupee resumed a paise lower at 60.77 a dollar from last Thursday's close of 60.76 and immediately touched a low of 60.78 only to bounce back on bullish equities following firm global cues triggered by lower crude prices.
It later touched a high of 60.65 before settling at 60.67, clocking a gain of nine paise or 0.15 per cent. This is its best closing since 60.55 on July 31, 2014.
Last Thursday, rupee had spurted 45 paise, or 0.74 per cent -- its best single-day gain in three months.
The Indian benchmark S&P BSE Sensex today extended its gains for the sixth session in a row and closed up 29.71 points, or 0.11 per cent. FIIs injected Rs 473.42 crore last Thursday as per provisional data with stock exchanges.
In Asia today, US benchmark West Texas Intermediate (WTI) for September delivery was trading below USD 97 while Brent Crude for October was quoting belos USD 102 a barrel on easing concerns about conflicts in Ukraine and Iraq.
Pramit Brahmbhatt, Veracity Group CEO, said: "Rupee continues to appreciate taking cues from the record breaking local equities backed by FII buying.
"Positive sentiments in the market formed by the recent better than expected data released from different countries boosted the global stock markets. The trading range for the Spot USD/INR pair is expected to be within 60.30 to 61.10."
Traders were looking ahead to a speech on Friday by Federal Reserve chief Janet Yellen for any hint of a change to the US central bank's interest rate plans.
Last month, Yellen said that Fed would hold its near-zero interest rate policy until the US economy strengthened, but may raise rates if the jobs market continues to improve.
Ahead of the keynote speech at the Fed's annual economic policy symposium, the release on Tuesday of US inflation data for July will provide a snapshot of the state of the world's biggest economy.
In the forward market, premium inched up on stray payments from banks and corporates.
The benchmark six-month premium payable in January edged up to 228-230 paise from 227-231 paise previously.
Far-forward contracts maturing in July, 2015 also ended small gain at 474-476 paise from 473-475 paise.
The Reserve Bank of India fixed the reference rate for dollar at 60.7260 and for the euro at 81.0432.
The rupee remained firm against the pound to 100.97 from 101.34 last Thursday and improved further to 59.10 per 100 Japanese yen from 59.34.
It also rallied to 80.99 against the euro from previous close of 81.27.