MUMBAI, Feb 12 (Reuters) - The Indian rupee and government bonds are likely to take cues from U.S. inflation and evolving expectations around the potential timeline and magnitude of rate cuts by the Federal Reserve, with the local inflation print also being key for debt.

The currency ended slightly lower at 83.0350 against the U.S. dollar on Friday and notched a marginal weekly decline of 0.1%.

While weakness in Asian currencies weighed on the rupee, dollar sales from foreign banks helped cap the local unit’s losses, traders said.

While inflation data from both India and the U.S. is on tap this week, the latter is likely to be the bigger trigger for the rupee, Dilip Parmar, a foreign exchange research analyst at HDFC Securities said.

Potential gains on the rupee are likely to be capped in the 82.80-90 zone, which has emerged as a "demand zone (for dollars)," Parmar added.

Strength in U.S. economic data and pushback from Fed policymakers on market expectations of early rate cuts aided the dollar and lifted U.S. bond yields. The 10-year U.S. Treasury yield was around 4.15%.

Meanwhile, the Reserve Bank of India (RBI) kept rates and stance unchanged at its policy meeting last week without providing major dovish guidance, signalling that interest rate cuts may be some time away as it focuses on the "last mile of disinflation" towards its 4% medium-term target.

India bond yields rose after the RBI decision, with the 10-year benchmark bond yield closing at 7.1067% on Friday, its highest closing level since Jan. 31.

The benchmark yield also rose 5 basis points for the week, the biggest such move since the week ended Jan. 5. It dropped 12 bps in the week ended Feb. 2, boosted by a fiscally prudent budget.

Market participants expect the benchmark bond yield to trade in the 7.05%-7.15% range this week.

With the economy in an extended Goldilocks period, with strong headline growth, capped core inflation and the risk of higher food inflation, there is little impetus for the RBI to change either its policy rates or stance, said Nomura.

The brokerage expects the RBI to cut rates by 100 bps between August and March.

Most market participants had anticipated a dovish guidance, as inflationary pressures are easing and after the government's fiscally prudent budget announcement for the next financial year.

New Delhi aims to reduce its fiscal deficit to 5.1% of gross domestic product next fiscal, with a gross borrowing target of 14.13 trillion rupees .

Traders would focus on January retail inflation reading, and a Reuters poll estimates the figures to have eased to 5.09%, from 5.69% in December. KEY EVENTS: ** India Jan CPI inflation - Feb. 12, Monday (Reuters poll 5.09% on-year) ** India Dec industrial output - Feb. 12, Monday (5:30 p.m. IST) (Reuters poll 2.4% on-year) ** U.S. Jan CPI - Feb. 13, Tuesday (Reuters poll 0.2% on-month) ** India Jan WPI inflation - Feb. 14, Wednesday (12:00 p.m. IST) (Reuters poll 0.53% on-year) ** U.S. Jan import prices - Feb. 15, Thursday (7:00 p.m. IST) ** U.S. initial weekly jobless claims week to Feb. 5- Feb. 15, Thursday (7:00 p.m. IST) U.S. Feb Philly Fed Business Index - Feb. 15, Thursday (7:00 p.m. IST) ** U.S. Jan retail sales - Feb. 15, Thursday (7:00 p.m. IST) ** U.S. Jan industrial production - Feb. 15, Thursday (7:45 p.m. IST) ** U.S. Jan PPI machine manufacturing - Feb. 16, Friday (7:00 p.m. IST)

** U.S. Jan housing starts number - Feb. 16, Friday (7:00 p.m. IST) ** U.S. Jan U Mich sentiment prelim - Feb. 16, Friday (8:30 p.m. IST) ($1 = 83.0243 Indian rupees) (Reporting by Dharamraj Dhutia and Jaspreet Kalra; Editing by Janane Venkatraman)