MUMBAI: The Indian rupee weakened to its lifetime low on Tuesday, hurt by concerns about a widening trade deficit and likely outflows from local equities, although intervention by the central bank capped losses.

The rupee hit a low of 84.93 against the US dollar, before closing at 84.8950, down 0.04% on the day.

Benchmark Indian equity indexes BSE Sensex and Nifty 50, closed lower by over 1% each, dragged by weakness in financial stocks and Reliance Industries. Investor sentiment was also dampened after data on Monday showed that India’s merchandise trade deficit rose to a record high of $37.84 billion, led by a surge in gold imports.

Foreign banks were spotted bidding for dollars, likely on behalf of custodial clients, while the Reserve Bank of India likely intervened via state-run banks to keep a lid on the local unit’s decline, traders said.

The wider trade deficit has “reinforced the upward bias (on USD/INR) and a rise above 85 seems quite likely in the next few sessions,” a trader at a private bank said.

The dollar index, meanwhile, was up 0.2% at 107 while most other Asian currencies weakened, led by a 0.6% decline in the Thai baht. US bond yields rose in Asia trading with investor focus squarely on the Federal Reserve’s policy decision due on Wednesday during US market hours.