MUMBAI, March 20 (Reuters) -

Indian government bond yields ended lower on Thursday, as

the U.S. Federal Reserve's monetary policy decision and the

recent rise in the rupee boosted bets of a rate cut from the

local central bank next month.

The benchmark 10-year bond yield ended at

6.6366%, compared with its previous close of 6.6601%.

On Wednesday, the Fed left interest rates unchanged but

maintained that it is likely to deliver two quarter-point rate

cuts later this year.

"The strengthening rupee is supporting market sentiment,

because now the Reserve Bank of India has room to do more on the

liquidity and rates front," said Gopal Tripathi, head of

treasury and capital markets at Jana Small Finance Bank.

"A rate cut in April can trigger a further drop... The

benchmark yield may go toward 6.55%-6.57% level."

India's overnight index swap rate also fell further after

the Fed policy decision, with the one-year OIS rate

and the five-year OIS rate

breaking past their key levels.

The RBI policy decision is due on April 9, when the central

bank is widely expected to reduce the repo rate again after a

cut in February.

Bond yields added to their downward move on Thursday as U.S.

yields also eased after the Fed decision.

India bond yields have been easing this week after

stronger-than-expected demand for a heavy state debt sale and a

surprise announcement of another open market bond purchase from

the RBI for March.

The RBI has already purchased bonds worth 1 trillion rupees

this month and is set to buy bonds worth another 500 billion

rupees on March 25.

Foreign banks also ramped up purchases of bonds this month,

amid increasing purchases from the central bank. These lenders

expect the benchmark bond yield to ease to 6.45%-6.50% levels,

and have net bought bonds worth nearly 276 billion rupees ($3.20

billion) so far in March.

($1 = 86.3230 Indian rupees)