INDIA RUPEE-Rupee to contend with uptick in US yields, paring of Fed cut expectations

MUMBAI, Dec 11 (Reuters) - The Indian rupee is likely to open slightly weaker on Monday, pressured by a rise in U.S. Treasury yields after labour market data prodded investors into paring bets on how soon the U.S. Federal Reserve will ease policy rates.

Non-deliverable forwards indicate the rupee will open at around 83.40-83.41 to the U.S. dollar compared with its close of 83.3850 in Friday's session. The rupee hit a record low of 83.42 on Nov. 10.

The 10-year U.S. Treasury yield was steady in Asia hours after rising to 4.24% on Friday, following data that showed U.S. job growth accelerated in November and the unemployment rate declined to 3.7%, down from 3.9% in October.

Investors are now pricing in a 42% chance that the Fed will start cutting rates in March, down from 55% from slightly over a week ago.

The dollar index was last quoted higher at 104 while Asian currencies fell, with the Korean won leading losses down by 0.9%.

For the rupee, "83.40 is a crucial support and till that breaks, it should stay in its muted range," a foreign exchange trader at a state-run bank said. The rupee has been range-bound between 83.01 and 83.40 for about a month.

The Reserve Bank of India left benchmark policy rates unchanged on Friday but raised its growth forecast for the current fiscal year to 7% from 6.5% earlier.

"We remain cautious over the next 3-6 months on INR, given a widening current account deficit and slowing FDI (foreign direct investment) inflows," MUFG Bank stated in a Monday note.

A week peppered with economic data releases and key central bank decisions is likely to keep investors on their toes.

The Fed, the Bank of England and the European Central Bank will all deliver policy decisions later this week while India and the U.S. will report inflation numbers for November.

KEY INDICATORS

** One-month non-deliverable rupee forward at 83.49; onshore one-month forward premium at 7.50 paise

** Dollar index up at 104.02

** Brent crude futures up 0.5% at $76.2 per barrel

** Ten-year U.S. note yield at 4.24%

** As per NSDL data, foreign investors sold a net $54.4mln worth of Indian shares on Dec. 7

** NSDL data shows foreign investors bought a net $122.6mln worth of Indian bonds on Dec. 7 (Reporting by Jaspreet Kalra; Editing by Janane Venkatraman)