MUMBAI, Sept 11 (Reuters) - The Indian rupee's direction this week will be a function of the U.S. inflation data midweek and how the Reserve Bank of India responds to the potential volatility, while bond yields may also be guided by domestic inflation data.

The rupee declined 0.3% to 82.9450 to the U.S. dollar last week, registering its worst performance in over a month. It would have likely dropped to a record low had it not been for the central bank's intervention on multiple fronts.

"The RBI's measured intervention has effectively kept the rupee from making a new low and we will have to see whether that continues this week," said Arnob Biswas, head of FX research at SMC Global Securities.

Traders anticipate the currency to trade in a narrow range of 82.75 to 83.25 this week.

"The U.S. consumer inflation data is in the pipeline this week, which is likely to mean more volatility for the rupee," said Biswas.

That report, due on Wednesday, is expected to show the headline index rose 0.5% month-on-month. Core prices, a more important measure from a monetary policy point of view, are expected to have risen by a moderate 0.2%.

The data comes in the wake of expectations that the Federal Reserve will hold fire in its September meeting and raise interest rates in November, the odds of which are more than 55%, as of Friday evening.

Meanwhile, the benchmark 7.26% 2033 bond yield ended at 7.2066% on Friday, having risen 4 basis points (bps) in the week. It had eased 5 bps in the previous two weeks.

Traders expect the benchmark yield to be in the 7.16%-7.24% zone this week, with the move in U.S. peers a key trigger.

India's inflation data for August is due on Tuesday, with expectations that the headline retail inflation number eased from the 15-month high of July but held above the upper end of the RBI's 2%-6% target for a second month, a Reuters poll found.

The poll of 45 economists predicted the consumer price index rose 7.00% in August, a dip from the 7.44% increase in July.

Traders said the core inflation data will be crucial since it will be the last before the RBI's next monetary policy meeting, due in early October.

"In the upcoming months, the influence of El Nino on the monsoon, in conjunction with global macroeconomic data, will be pivotal in guiding the actions of the central bank," said Rahul Bhuskute, chief investment officer at Bharti AXA Life Insurance.

"Given these circumstances, it is projected that the 10-year yield will remain around the existing levels in the short term."

Meanwhile, market sentiment slightly soured after the RBI said it would wind down the incremental cash reserve ratio (I-CRR) requirement in phases -- releasing 25% of the I-CRR funds on Sept. 9, another 25% on Sept. 23 and the rest on Oct. 7.

Traders said the initial availability of funds was sharply smaller than the tax outflows scheduled, which may weigh on investor sentiment.

KEY EVENTS:

** India July industrial output - Sept. 12, Tuesday (5:30 p.m. IST)

** India August CPI inflation - Sept. 12, Tuesday (5:30 p.m. IST)

** U.S. August CPI - Sept. 13, Wednesday (6:00 p.m. IST)

** India August WPI inflation - Sept. 14 Thursday (12:00 p.m. IST)

** ECB refinancing and deposit rate - Sept. 14 Thursday (5:45 p.m. IST)

** U.S. August retail sales - Sept. 14, Thursday (6:00 p.m. IST)

** U.S. initial weekly jobless claims week to Sept. 4 - Sept. 14, Thursday (6:00 p.m. IST)

** U.S. August import prices - Sept. 15, Friday (6:00 p.m. IST)

** U.S. August industrial production Sept. 15, Friday (6:45 p.m. IST) (Reporting by Nimesh Vora and Dharamraj Dhutia; Editing by Savio D'Souza)