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 dollar index inched up to 109.14 compared to 108.98 on Wednesday. The index measures the strength of the greenback against a basket of six major currencies

The rupee recovered slightly from its record low and settled with a gain of 5 paise at 85.86 against the US dollar on Thursday amid firm American currency and elevated level of crude oil prices.

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.

Record high NDF trading volume in India's offshore hub amid rupee concerns prompts banks and companies to exploit arbitrage.

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.