Weak US dollar overseas also aided the Indian rupee rally while sustained foreign funds inflow restricted the rise to some extent, a forex dealer said.
At the Interbank Foreign Exchange (Forex) market, the domestic unit commenced higher at 62.67 a dollar from last weekend's close of 62.87 and immediately touched a low of 62.70.
However, it met with strong resistance and bounced back to a high of 62.14 before concluding the week at 62.44, showing a rise of 43 paise or 0.68 pct. Last week, it had gained by 24 paise or 0.38 pct.
The BSE benchmark Sensex snapped its three-week losing string and shot up by 574.54 points or 2.84 pct while FIIs injected USD 91.34 million on the first four days of the current week, as per Sebi data.
Meanwhile, exuding confidence that growth rate will climb to 6 per cent next year, Finance Minister P Chidambaram on Friday said in next 6 months government will liberalise capital markets and financial sector to help economy return to high growth trajectory.
After sluggish growth in the first quarter, Indian economy grew by 4.8 per cent in the second quarter this fiscal due to improved performance of farm, manufacturing, construction and services sectors. The country's gross domestic product (GDP) had expanded by 4.4 per cent in the April-June quarter of this fiscal.