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The Indian rupee is expected to be range-bound, along with government bond yields, as they take cues from local and U.S. inflation data this week that is likely to influence expectations of potential rate cuts by central banks. The rupee closed at 84.6875 against the U.S. dollar on Friday, down 0.2% week-on-week. The currency had declined to its all-time low of 84.7575 earlier in the week. While the rupee has faced pressure over the past two months, a pickup in portfolio inflows and growing expectations of a Federal Reserve rate cut "should help out on the margins," said a trader with a private bank. Traders expect the local currency to hover between 84.50 and 84.90 this week. Foreign investors have net purchased over $4 billion in local stocks and bonds so far in December, a reversal from outflows worth about $14 billion over the last two months. U.S. jobs data released on Friday was largely along expected lines, prompting investors to ramp up bets on a December rate cut. "However they (the Fed) are set to signal a slowing in the pace of cuts with a pause at the January FOMC meeting looking likely," ING Bank said in note, adding that a hot U.S. CPI report on Wednesday may imperil December's rate cut hopes.

India's consumer inflation data, due on Thursday, is expected to influence speculation about potential rate cuts by the Reserve Bank of India, which had kept policy rates unchanged on Friday.

Most market participants currently anticipate a 25-basis-points repo rate cut in February.

The benchmark 10-year bond yield rose six basis points to 6.7446% on Friday, posting its biggest single-session jump in six months after the central bank's monetary policy decision.

Traders expect the yield to remain in the 6.70%-6.80% range this week, after dipping to as low as 6.65% on Friday.

The RBI kept its key interest rate unchanged on Friday, but cut banks' cash reserve ratio for the first time in more than four years, effectively easing monetary conditions as economic growth slowed.

The CRR was cut by 50 basis points to 4%, effective in two tranches starting from Dec. 14 and Dec. 28. This was the first cut since March 2020 and the move will infuse 1.16 trillion rupees ($13.70 billion) into the banking system.

"We believe that bond yields will continue to be supported by more liquidity infusion measures like OMO (open market operation) purchases by the RBI and continuous growth slowdown along with inflation cooling off," said Puneet Pal, head of fixed income at PGIM India Mutual Fund.

The focus for the week will remain on inflation readings, ahead of the Fed's policy decision next week.

Traders will also closely monitor foreign investors' appetite, as they have become significant buyers of bonds, anticipating policy easing from the RBI.

KEY EVENTS: India ** October industrial production data - Dec. 12, Thursday (4:00 pm IST) (Reuters poll: 3.60%)

** November CPI inflation data - Dec. 12, Thursday (4:00 pm IST) (Reuters poll: 5.50%)

** November WPI inflation - Dec. 13, Friday (12:00 pm IST) (Reuters poll: 2.20%) U.S. ** November CPI and core CPI - Dec. 11, Wednesday (7:00 p.m. IST) (Reuters poll - 0.2% and 0.3% month-on-month)

** initial weekly jobless claims week to Dec. 2 - Dec. 12, Thursday (7:00 p.m. IST) ** November PPI machine manufacturing - Dec. 12, Thursday (7:00 p.m. IST)

** November import prices - Dec. 13, Friday (7:00 p.m. IST)

($1 = 84.6680 Indian rupees)