The rupee settled at 83.6500 against the U.S. dollar, down from its close at 83.5825 in the previous session. It had hit its all-time low of 83.6650 on June 20.
The currency weakened despite broad declines in the greenback and U.S. bond yields. The dollar index was up slightly on Thursday after declining to a four-month low of 103.6 in the previous session.
Rising odds of rate cuts by the Federal Reserve have weighed on the greenback and U.S. yields, offering some relief to Asian currencies.
Interest rate futures predict a Fed rate cut in September and a total of two-and-a-half rate cuts this year.
Recent weakness in the rupee is more of the currency "catching up" with its Asian peers, a trader at a foreign bank said.
The rupee has outperformed most Asian peers this year, slipping 0.5% against the dollar while other currencies have fallen 1.5% to 5%.
Traders say the Reserve Bank of India's absorption of dollar inflows has limited gains for the rupee.
"INR may shift from its outperformance year-to-date to now underperforming some FX pairs if the recent US Dollar weakness trend is sustained, due in part to the central bank's activist hand in the FX market," Michael Wan, a senior currency analyst at MUFG Bank said in a note.
On Thursday, dollar-rupee forward premiums rose, aided by the decline in U.S. bond yields. The 1-year implied yield gained 2 basis points to 1.75%, its highest since February.
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