The rupee ended Monday at its highest closing level against the dollar in nearly eight months as continued foreign inflows sent shares to record highs, although further gains in the currency were capped by strong demand from oil firms.
Domestic shares jumped nearly 1.5 per cent on Monday to an all-time high, surpassing their previous record hit just last week, as lenders including ICICI Bank extended a recent rally.
Foreign funds have bought shares worth $2.3 billion so far in March, taking total inflows in 2014 to $2.6 billion.
"Custodian banks were offering dollars but good bids came in from state-run banks, pulling the rupee off highs," said Hari Chandramgethen, head of foreign exchange trading at South Indian Bank.
"There is good support for the dollar/rupee at 60.50-60 levels. I expect a range of 60.30 to 61.10 for the pair in the rest of the week."
The partially convertible rupee closed at 60.77/78 per dollar compared with 60.8950/9050 on Friday, marking its strongest close against the dollar since August 1. The unit rose as high as 60.6450 intra-day, its strongest since March 11.
Traders said gains in other Asian units also underpinned sentiment for the rupee after the yuan rebounded from its 13-month low.
In the offshore non-deliverable forwards, the one-month contract was at 61.13, while the three-month was at 61.81.