The Indian rupee rose on Monday aided by likely equity inflows and dollar sales from state-run banks, traders said.

The rupee closed at 83.3625 against the U.S. dollar, up 0.1% from its close at 83.47 in the previous session.

The currency had dropped to a record low of 83.5750 on Friday but has since recovered modestly helped by the central bank's intervention and as fears of escalation in the Middle East conflict ebbed.

Both foreign and state-run banks were spotted offering dollars on Monday, which helped lift the rupee, a foreign exchange salesperson at a private bank said.

The dollar index was little changed at 106.1 and most Asian currencies were rangebound as risk aversion eased after Iran played down the impact of an Israeli drone attack and indicated it had no plans for retaliation.

Brent crude oil futures declined 0.7% on Monday to $86.70 per barrel. Indian equities rose with the benchmark indexes the BSE Sensex and the Nifty 50 up nearly about 0.8% and 0.9%, respectively.

Meanwhile, U.S. bond yields ticked higher as demand for safe-haven assets eased. The 10-year U.S. Treasury yield rose to 4.65% while the 2-year Treasury yield also inched up to 5%.

The rupee's gains are "likely to be a temporary relief," as a hawkish repricing of U.S. Federal Reserve rate cut expectations will continue to support the dollar, Arnob Biswas, head of foreign exchange research at SMC Global Securities said.

A string of stronger-than-expected U.S. economic data has prompted investors to temper hopes of deep rate cuts by the Fed, with only one-and-a-half rate cuts now priced in over 2024.

U.S. GDP data due on Thursday followed by personal consumption expenditure (PCE) inflation data on Friday will be key to further shape investors' expectations of policy easing by the Fed. (Reporting by Jaspreet Kalra; Editing by Eileen Soreng)