MUMBAI, Jan 9 Reuters The Indian rupee weakened to its lifetime low on Thursday as the dollar strengthened on the back of expectations of slowerthananticipated rate cuts by the Federal Reserve as well as uncertainty about the incoming U.S. President39;s policies.

The rupee declined to 85.9325 against the U.S. dollar before closing at 85.8475, little changed on the day.

The local unit was under pressure through most of the session but staterun banks39; dollar sales, most likely on behalf of the Reserve Bank of India, helped limit the currency39;s losses, traders said.

While the RBI has routinely stepped in to support the currency, analysts reckon that the central bank could loosen its ironclad grip in 2025.

The RBIs policy of tightly managing the rupee has run its course. INR overvaluation is impinging on exports and obstructing the governments objective of strengthening the manufacturing sector, ANZ Bank said in a note.

On the day, the dollar index was up 0.1 at 109.2, hovering just below its highest level in over two years hit last week, while most Asian currencies declined.

A sharp selloff in the world39;s biggest government bond markets and a continued rise in the dollar sent shockwaves through financial markets on Thursday.

The narrative of US exceptionalism is alive and well in FX markets, where investors are now hypersensitive to incoming headlines about Trump policy, ING Bank said in a note.

A report that Presidentelect Donald Trump was contemplating…