Mumbai, May 25 (PTI) The rupee appreciated 40 paise to 95.20 against US dollar in early trade on Monday on optimism that the US and Iran were moving close to a peace deal even though they remained at odds over key issues, including blockades on the Strait of Hormuz.

Forex traders said the rupee opened on a positive note as the US and Iran have "largely negotiated" a peace pact to end the nearly three-month war.

US President Donald Trump has told the negotiators "not to rush into a deal" and that "both sides must take their time and get it right".

Moreover, US Secretary of State Marco Rubio said the US and India are on the verge of finalising an interim trade agreement after progress in negotiations with the US Trade Representative to visit India very soon.

At the interbank foreign exchange market, the rupee opened at 95.36 against the US dollar, then touched 95.20 in early trade, up 40 paise from its previous close.

On Friday, the rupee rose 75 paise to close at 95.60 against the US dollar.

"The trade deal will be beneficial to both the US and India," said Anil Kumar Bhansali, Head of Treasury and Executive Director Finrex Treasury Advisors LLP.

Today being a US holiday the cash demand will be lower but month-end demand could crop up while the RBI will be present to keep a tab over the dollar, Bhansali added.

India and the US are poised to soon firm up the much-awaited trade agreement that will be both "beneficial" and "sustainable" and will advance the mutual interests of both nations, Rubio said on Sunday, asserting that the overall bilateral ties are set to witness an upward trajectory.

Rubio, currently on a four-day visit to India, made the remarks after holding wide-ranging talks with External Affairs Minister S Jaishankar that focused on boosting two-way cooperation in areas of trade, critical minerals, energy and defence.

Meanwhile, the dollar index, which gauges the greenback's strength against a basket of six currencies, was trading at 99.04, down 0.20 per cent.

Brent crude, the global oil benchmark, was trading down 5.43 per cent USD 97.92 per barrel in futures trade.

On the domestic equity market front, Sensex jumped 908.98 points to 76,317.85 in early trade, while the Nifty surged 262.65 points to 23,977.70.

Foreign institutional investors offloaded equities worth Rs 4,440.47 crore on a net basis on Friday, according to exchange data.

Meanwhile, the country's forex reserves dropped USD 8.094 billion to USD 688.894 billion during the week ended May 15, the Reserve Bank of India (RBI) said on Friday. In the preceding week ending May 8, the overall reserves had jumped by USD 6.295 billion to USD 696.988 billion. PTI DRR TRB TRB