The Indian rupee rose for a second straight week, helped by foreign inflows into equities, but gains were capped on expectations that the central bank would not allow the currency to appreciate significantly.

The rupee ended at 81.9450 to the US dollar compared with 81.9850 on Thursday.

The domestic currency rose 0.1 per cent this week, but largely hovered around 82 per dollar amid a lack of volatility. The rupee had risen 0.6 per cent last week.

"We are in a rare phase for the rupee where normal influences are not working - be it global or domestic," said Jayram Krishnamurthy, co-founder at Almus Risk Consulting.

That, Krishnamurthy said, was due to the actions of the central bank curbing the rupee's volatility and showing a clear intent to not let it appreciate, despite many factors working in favour of its rise. Foreign investors bought around $640 million in Indian equities in the first three trading sessions of this week, data from the National Securities Depository Limited showed.

Despite the flows, the rupee did not appreciate above 81.95 during the week on possible intervention by the Reserve Bank of India, traders said.

Focus has now shifted to the US Federal Reserve's policy decision due next Wednesday, where a 25 basis point (bps) interest rate hike is completely factored in.

Investors will watch out for commentary from Fed Chairman Jerome Powell next week on the outlook for future rate hikes.

A slew of important data releases out of the US - flash purchasing manager's index, June-quarter gross domestic product, initial jobless claims, and core personal consumption expenditures index will also be on investors' radar next week.

The dollar index is up over 1 per cent so far this week, while the 10-year US Treasury yield has risen about three bps.