MUMBAI, Jan 6 (Reuters) - Indian government bond yields are expected to open higher on Friday, ahead of the weekly debt auction.

The benchmark 10-year yield is likely to move in a 7.30%-7.34% range, a trader with a private bank said. The yield ended at 7.3271% on Thursday.

New Delhi is aiming to raise 280 billion rupees ($3.39 billion) through the sale of bonds later in the day and the auction includes 120 billion rupees of the benchmark note.

Yields have barely budged this week and, if the auction demand is weaker, we may see a test of 7.35% levels after the auction result, the trader said.

Traders are also awaiting the federal budget announcement, likely on Feb. 1, for the next financial year's borrowing plan.

Meanwhile, the 10-year U.S. Treasury yield was around 3.70%, while the benchmark Brent crude contract stayed below $80 per barrel.

India is one of the largest importers of the commodity and oil prices have a direct impact on retail inflation. Domestic inflation data for December is due next week.

Inflation eased to 5.88% in November, coming in below the central bank's upper tolerance level of 6% for the first time in eleven months. However, core inflation stayed above 6%.

Barclays expects headline inflation of 5.96% in December, with core inflation at 6%. But, with inflation still very close to the Reserve Bank of India's upper bound, the brokerage continues to expect an interest rate hike in February.

The RBI is mandated to keep inflation around 4%, with a tolerance level of 200 basis points (bps) on either side. The central bank has hiked the repo rate by 225 bps in 2022, to 6.25%, in its fight against inflation.

The RBI's next monetary policy meeting is on Feb. 8, shortly after the union budget.

KEY INDICATORS:

** Brent crude futures up 1% at $79.50 per barrel, after falling nearly 1.1% in the previous session

** 10-year U.S. Treasury yield was at 3.7144% and the two-year note at 4.4534%

** India to sell federal government bonds worth 280 billion rupees

** RBI to set underwriting fees for 280 billion rupees weekly bond auction ($1 = 82.5680 Indian rupees) (Reporting by Dharamraj Dhutia; Editing by Savio D'Souza)