The RBI likely sold dollars via state-run banks after the rupee hit 61.17 levels, dealers told Reuters. The currency traded at 61.02 as of 09.50 a.m.
The rupee has come under sharp selling pressure after the Reserve Bank kept interest rates on hold yesterday and failed to announce any additional steps to defend the currency. The partially convertible currency has now erased all gains since the Reserve Bank of India first announced steps to defend the rupee by withdrawing cash on July 15.
Analysts said those actions alone were unlikely to prevent more falls in the currency unless followed by additional steps from the central bank or by measures from the government to attract foreign inflows.
Instead, the central bank said on Tuesday it may withdraw the cash tightening steps taken so far in a calibrated manner if the rupee stabilises, comments that led investors to doubt the RBI's resolve in sticking to its measures given surging bond yields threaten to raise borrowing costs.
"It seems slightly strange for the RBI to tell the market that it will unwind the liquidity tightening measures as and when the currency has stabilised," said Robert Prior-Wandesforde, economist at Credit Suisse, wrote in a note.
"After all, by indicating such an approach, it presumably makes it less likely that stability will actually be achieved!"
The government is contemplating measures of their own and will announce steps in the next few weeks to curb the current account deficit, chief economic adviser Raghuram Rajan said.
The current account deficit, which hit a record high of 4.8 per cent of gross domestic product in the fiscal year ended in March, is a key source of stress for the rupee.
However, RBI Governor D Subbarao made it clear on Tuesday he was opposed to a sovereign bond issuance, another option that could bring foreign inflows, although it would risk sending a signal of weakness to markets.
Fresh weakness in the currency comes ahead of the outcome of the U.S. Federal Reserve policy meeting later today. The Fed may indicate the timing of quantitative easing tapering, which will impact all risk assets including the rupee.