MUMBAI, Sept 4 (Reuters) -

The Indian rupee is likely to see a downward bias this week supported by an upbeat dollar index, while bond yields may move slightly higher tracking U.S. Treasuries.

The rupee ended last week at 82.7150, marking a weekly loss of 0.1%.

The dollar index climbed on Friday despite a key U.S. jobs report cemented bets that the Federal Reserve's rate hiking cycle is nearing an end.

The non-farm payrolls data showed that the U.S. unemployment rate rose to 3.8% in August. Following the report, futures indicated almost no chance of a September rate hike and an about 35% chance of an increase in November. The dollar initially dropped following the report but recovered later.

"Simply based on how dollar moved (after the jobs report), I would say the bias (on USD/INR) is higher," a forex trader at a bank said.

U.S. non-farm payrolls increased slightly more than estimated in August, while wage growth was soft.

"Softening US jobs market suggests the Fed’s work is done," ING Bank said in a note.

Meanwhile, the benchmark 7.26% 2033 bond yield ended at 7.1671% last Friday, falling four basis points (bps) in the week. It had eased 1 bp the previous week after rising an aggregate of 14 bps in the prior four weeks.

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

U.S. yields rose on Friday.

Locally, inflation trajectory and the evolving banking system liquidity conditions will continue to drive investor sentiment as the Reserve Bank of India (RBI) reviews its decision to reduce liquidity in the banking system via a temporary increase in the cash reserve ratio.

With liquidity likely strained due to increased cash in circulation for the upcoming festival season, tax outflows and government expenditures, the RBI's focus "will be on managing the situation," said Rahul Bhuskute, chief investment officer at Bharti AXA Life Insurance.

Retail inflation spiked to 7.44% in July, the highest since April 2022, from 4.87% in the previous month, but a cut in cooking gas prices could lead to an impact of 20-30 bps on the September reading, economists said.

KEY EVENTS:

** India S&P Global Services PMI - Sept. 5, Tuesday (10:30 a.m. IST)

** U.S. Jul factory orders - Sept. 5, Tuesday (7:30 p.m. IST)

** U.S. Jul international trade - Sept. 6, Wednesday (6:00 p.m. IST)

** U.S. Aug S&P Global services and composite final PMI - Sept. 6, Wednesday (7:15 p.m. IST)

** U.S. Aug ISM non-manufacturing PMI - Sept. 6, Wednesday (7:30 p.m. IST)

** U.S. initial weekly jobless claims week to Aug. 28 - Sept. 7, Thursday (6:00 p.m. IST)

(Reporting by Jaspreet Kalra and Dharamraj Dhutia; Editing by Janane Venkatraman and Dhanya Ann Thoppil)