The Indian rupee weakened to its lifetime low on Thursday as the dollar strengthened on the back of expectations of slower-than-anticipated rate cuts by the Federal Reserve as well as uncertainty about the incoming U.

The rupee weakened to its lifetime intraday low on Thursday to 85.932 per dollar before closing at 85.848/$1, little changed from the previous day.

The rupee witnessed a slight recovery on Thursday, gaining 4 paise to settle at 85.87 against the US dollar, rebounding from its record low of 85.91 recorded a day earlier.

Banks executed NDF trades worth more than $161 billion at the offshore hub, a sharp rise of 140 per cent from a year ago, data from Clearing Corporation of India showed

Forex traders said the relentless outflow of foreign funds amid soaring US bond yields boosted the American currency, while subdued domestic equity markets pushed the rupee down further.

The Indian rupee dropped to an all-time low on Wednesday, pressured by a resumption of the dollar's uptrend after data pointed to a resilient U.S. economy, reinforcing bets that the Federal Reserve won't be in a rush to cut policy rates.

The rupee depreciated 9 paise to hit its record low of 85.83 against the US dollar in early trade on Wednesday as strengthening American currency and higher crude oil prices continued to play spoilsports even as the government lowered the country's economic growth projection.