The rupee had settled at 69.68 against the dollar on Wednesday.

The rupee on Thursday surged 24 paise to close at a one-week high of Rs 69.44 against the US currency on the back of a rally in equities and losses in the dollar after the US Federal Reserve hinted at a possible rate cut in near future. The rupee rose to a high of 69.35 to the dollar in intraday trade on the US Federal Reserve's comments that a case for a rate cut has strengthened in view of the US-China trade war and low inflation. A spike in crude oil prices after Iran said it shot down a US drone in its coastal southern province, however, checked the rupee gains.

Brent crude futures, the global oil benchmark, rose by 2.67 per cent to trade at $63.47 per barrel on heightening tensions between the US and Iran.

At the interbank foreign exchange (forex) market, the domestic currency closed up by 24 paise or 0.34 per cent at 69.44, a level not seen since June 12. The rupee had settled at 69.68 against the dollar on Wednesday.

Meanwhile, the 10-year government bond yield fell to 6.79 per cent on Thursday, following a global trend. The yield on US Treasuries dropped below 2 per cent -- the first time since 2016 after the Fed comments. Falling US yields make emerging markets attractive for global investors due to large rate differential.

Foreign funds, however, pulled out Rs 438 crore from capital markets on a net basis on Thursday, provisional data showed.

The dollar index, which gauges the greenback's strength against a basket of six currencies, fell 0.49 per cent to 96.64.

The BSE Sensex rallied 489 points Thursday, driven by gains in banking, healthcare and auto stocks. After gyrating over 700 points during the day, the gauge settled 488.89 points, or 1.25 per cent, higher at 39,601.63. Similarly, the broader NSE Nifty closed 140.30 points, or 1.20 per cent, higher at 11,831.75.

The Financial Benchmark India Private Ltd (FBIL) set the reference rate for the rupee/dollar at 69.6677 and for rupee/euro at 77.9925. The reference rate for rupee/British pound was fixed at 87.4878 and for rupee/100 Japanese yen at 64.34.