Mumbai, May 29 (PTI) The rupee appreciated 73 paise to close at 94.85 against the US dollar in early trade on Friday, as renewed optimism over the peace deal between the US and Iran boosted market sentiments.

Forex traders said the USD/INR pair appreciated on an overnight decline in crude oil prices and a fall in the US dollar, after the US and Iran reached an understanding to extend the ceasefire for another 60 days.

On Thursday, the US and Iranian negotiators reached a tentative agreement to extend the ceasefire by 60 days and start a new round of talks on Iran's nuclear programme.

At the interbank foreign exchange market, the rupee opened at 95.77 against the US dollar, then touched an intraday high of 94.85 and a low of 95.78 during the day.

At the end of Friday's trading session, the rupee was quoted at 94.85, up 73 paise from its previous close.

On Wednesday, the rupee settled higher by 12 paise at 95.58 against the US dollar.

Domestic equity and forex markets were closed on Thursday on account of Eid-ul-Azha.

"We expect the rupee to trade with a slight positive bias on renewed optimism over the peace deal between the US and Iran, pending approval from Donald Trump and the Iran supreme leader.

"Softening crude oil prices and easing of the dollar may also support the rupee. However, any fresh escalations between the US and Iran may pressurise the rupee at higher levels. USD-INR spot price is expected to trade in a range of 94.70. to 95.60," said Anuj Choudhary, Research Analyst at Mirae Asset ShareKhan.

Dilip Parmar, Research Analyst, HDFC Securities, said the rupee outperformed its Asian peers, bolstered by falling crude oil prices and suspected interventions by the RBI.

"The currency also recorded its largest single-day gain since April 2, driven by aggressive central bank action and market optimism surrounding a tentative US-Iran ceasefire extension. From a technical perspective, spot USD-INR is expected to trend lower toward the 94.50 to 94.30 levels, with immediate resistance holding at 95.70," Parmar said.

Meanwhile, the dollar index, which gauges the greenback's strength against a basket of six currencies, was trading at 99.13, up 0.11 per cent.

Brent crude, the global oil benchmark, was trading down 1.81 per cent at USD 92.01 per barrel in futures trade.

Forex traders said attention has now shifted toward the upcoming RBI Monetary Policy Committee meeting scheduled for June 3-5.

According to experts, the RBI might opt for a rate hike or for a status quo decision. The larger question, however, is whether RBI may choose to prioritise currency stability alongside inflation management.

On the domestic equity market front, Sensex tanked 1,092.06 points to settle at 74,775.74, while the Nifty slumped 359.40 points to 23,547.75.

Foreign institutional investors offloaded equities worth Rs 21,105.86 crore on a net basis on Friday, according to exchange data.

According to RBI's latest data released on Friday, India's forex reserves dropped USD 7.511 billion to USD 681.384 billion during the week ended May 22. In the previous reporting week, the kitty had dropped USD 8.094 billion to USD 688.894 billion. PTI DRR HVA

Rupee strength against the US dollar gains support from softer crude, weaker dollar and improved US-Iran ceasefire sentiment. The rupee strengthened against the US dollar on improved market sentiment after optimism over a US-Iran ceasefire extension, lower crude oil prices and a softer dollar. Market participants also noted suspected central bank support, while attention shifted to the upcoming RBI Monetary Policy Committee meeting and its balance between currency stability and inflation management. Broader market conditions showed equity weakness, net foreign institutional selling and a decline in India's foreign exchange reserves.