The Indian rupee on Thursday closed at a four-month high of 69.70 against the US dollar, on the back of falling crude oil prices.

The Indian currency saw a tremendous appreciation in the late afternoon, by jumping 70 paise against the greenback, as oil prices in the global markets began to slide.

Prior to this, rupee had closed at 69.08 against the greenback on August 13, 2018, after which it started falling.

On Wednesday, rupee had closed at 70.40 against the dollar, on the back of a dip in the bond yield.

The rupee witnessed the appreciation despite foreign portfolio investors withdrawing Rs 386.44 crore from the Indian debt and equity markets, as US Federal Reserve went ahead with yet another interest rate hike of 25 basis points. Earlier on Wednesday, Fed hiked its interest rates from 2.25% to 2.50%, despite the industry clamour against such move.

"The fall in oil prices has led to improved market sentiments and has contributed to the fall in yields and the gains in the rupee,” Kavita Chacko, Senior Economist at Care Ratings said.

The crude on Thursday continued to fall due to the supply-demand mismatch. The benchmark Brent Crude was trading in the international markets at $55.59, down 2.81% at the time of going to press. Prior to this, the Brent crude had touched $55.47/bbl on September 15, 2017.

Most analysts attribute this to the supply-demand mismatch in the global oil markets as the US oil production is at an all-time high, while the demand has remained constant on the back of a switch in the non-renewable sources of energy.

During the day’s trade bond yields of 10-year G-Sec also went up by 0.78% to 7.275% after touching a 10-month low level of 7.223% on Tuesday.

Bond yield refers to the rate of return or interest paid to the bondholders while the bond price is the face value the bondholder pays. Bond prices and bond yields are inversely correlated. A rising yield is dollar bullish. A falling yield is dollar bearish.