MUMBAI : Indian rupee on Thursday strengthened against the US dollar for third day in a row, the most in three months, as oil prices softened on the back of easing US-Iran tensions. Speculation that acquisition-related foreign inflows are surging also boosted sentiment.

Rupee closed at 71.22 a dollar, up 0.69% from Tuesday's close of 71.71. The Indian unit had opened at 71.42 – the day’s high so far.

The rally in the rupee primarily started on the back of a reversal in the US-Iran tensions, says Tushar Sharma, an FX trader at RBL Bank Ltd. in Mumbai

A drop in oil prices, due to easing geopolitical tensions, is also aiding bond-market sentiment, says Debendra Dash, a fixed-income trader in Mumbai at AU Small Finance Bank

Yield on the 10-year government bond was at 6.530% compared with its previous close of 6.559%. Benchmark index, Sensex index gained 1.55%, or 634.61 points, to close at 41452.35 points. Year to date, the index has lost 0.48%.

Year-to-date, the rupee gained 0.23%, while foreign investors have bought nearly $248.56 million in Indian equities and sold $913.78 million in debt.

Asian currencies closed higher. The South Korean Won was up 1.01%, Indonesian Rupiah 0.33%, Philippines Peso 0.32%, Taiwan Dollar 0.28%, Malaysian Ringgit 0.25%, Thai Baht 0.24%, China Renminbi 0.21%, China Offshore 0.10% and Hong Kong dollar 0.09%. However, the safe-haven Japanese yen lost 0.28% and Singapore Dollar 0.30%.

The dollar index, which measures the US currency’s strength against a basket of major currencies, was at 97.464, up 0.17% from its previous close of 97.299.

(Bloomberg contributed this story)