The rupee extended its gains against the American currency for the second consecutive day, surging 23 paise to end at nearly three-week high at 61.97 on Wednesday on Budget optimism and sustained dollar selling by banks.

Good foreign capital inflows also helped the rupee maintain its gains at closing, forex traders said.

The rise comes ahead of the Union Budget on Saturday that is expected to be a platform for more reform initiatives and growth measures.

The rupee resumed higher at 62.06 per dollar as against the yesterday's closing level of 62.20 per dollar at the Interbank Foreign Exchange (Forex) Market.

It further firmed up to 61.95 on sustained selling of dollars before ending at 61.97 per dollar, showing a gain of 23 paise or 0.37 per cent.

The local currency has mow gained by 34 paise or 0.55 per cent in two sessions.

The closing value of the rupee is near three week highs. It had ended at 61.69 per dollar on February 6, 2015.

Pramit Brahmbhatt, Veracity Group, CEO said, "The optimism over the upcoming Budget influenced trading sentiments and helped indices to trade strong during the day which supported the upward movement of the rupee.

The trading range for the spot USD/INR pair is expected to be within 61.60 to 62.40."

Budget 2015: Complete Coverage