By Nimesh Vora

MUMBAI (Reuters) - The Indian rupee will open higher on Thursday after weak U.S. retail sales and cooling U.S. inflation made it more likely that the Federal Reserve will cut rates later this year.

Non-deliverable forwards indicate the rupee will open at 83.42-83.44 to the U.S. dollar, up from 83.50 in the previous session.

U.S. consumer prices increased less than expected in April, fuelling hopes that the Fed will reduce borrowing costs, most likely at the September meeting.

U.S. retail sales were unexpectedly flat in April against the expected 0.4% increase, providing one more reason to bet that the Fed will reduce interest rates. Control retail sales fell 0.3% on-month.

Control retail sales, which are used to help calculate GDP, have been negative in three of the first four months of this year, ANZ Bank pointed out.

The dollar index and the 10-year U.S. Treasury yield were down to their lowest in more than a month, while U.S. equities rallied. Futures are pricing in two interest rate cuts this year.

The Korean won and the Thai baht led Asian currencies higher, climbing 1.5% and 0.8%, respectively. Asian equities followed their U.S. peers higher and futures on the S&P 500 Index rose more.

"Well, we have a number of positive cues (for the rupee). While you will obviously not expect to see the kind of move that Asia has, let's see if we can at least move past the 83.35-83.40 region," an FX trader at a bank said.

The upside in the rupee is expected to be capped by the ongoing nervousness about the India election outcome, which is prompting foreign outflows. Foreigners have withdrawn more than $3 billion from Indian equities in nine sessions in May so far, NSDL data shows.

KEY INDICATORS: ** One-month non-deliverable rupee forward at 83.50; onshore one-month forward premium at 7.75 paise

** Dollar index down at 104.16 ** Brent crude futures up 0.5% at $83.1 per barrel ** Ten-year U.S. note yield at 4.32% ** As per NSDL data, foreign investors sold a net $300.9mln worth of Indian shares on May. 14

** NSDL data shows foreign investors sold a net $9.8mln worth of Indian bonds on May. 14

(Reporting by Nimesh Vora; Editing by Janane Venkatraman)