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The Indian rupee is expected to decline on Friday after the number of Americans filing new claims for unemployment benefits unexpectedly fell last week, lifting the U.S. dollar and U.S. yields.

Non-deliverable forwards indicate the rupee will open at around 82.06-82.08 to the U.S. dollar, compared with 81.9850 in the previous session.

"Just when there was a slight downside momentum (on USD/INR), the dollar is on its way up," a forex trader at a bank said.

The USD/INR pair will be "a bit bid" at open, but "that should be about it and a quiet day awaits."

The rupee through the week has been in a narrow 25 paisa range.

The dollar index and U.S. yields rose after data indicated the U.S. labour market remained resilient, which increased the probability that the Federal Reserve may deliver a rate hike beyond its July meeting.

Initial claims for unemployment benefits dropped 9,000 to a seasonally adjusted 228,000, the lowest since mid-May. Economists polled by Reuters had forecast 242,000 claims for the latest week.

Supported by the jobless claims data, the dollar has reversed course and investors are worried that any data that indicates the economy is doing well will drag the rate hike cycle further, said Srinivas Puni, managing director at QuantArt Market Solutions.

The dollar index reached just shy of 101 on Thursday. The 2-year U.S. climbed to above 4.80%.

The Fed next week is widely expected to deliver a 25 basis points rate hike. Investors were pricing a prolonged pause after that, but if U.S. labor market data continues to surprise positively, a hike in September or November is likely.

KEY INDICATORS: ** One-month non-deliverable rupee forward at 82.14; onshore one-month forward premium at 8 paisa ** USD/INR NSE July futures settled at 81.9625 on Thursday ** USD/INR July forward premium at 2.25 paisa ** Dollar index at 100.74 ** Brent crude futures up 0.9% at $80.4 per barrel ** Ten-year U.S. note yield at 3.85% ** As per NSDL data, foreign investors bought a net $267.2mln worth of Indian shares on Jul. 19

** NSDL data shows foreign investors sold a net $21.4mln worth of Indian bonds on Jul. 19