India's central bank likely intervened in foreign exchange markets on Tuesday after the rupee breached the key 54 level against the dollar, nearly hitting its lifetime low, dealers said.
India's Reserve Bank of India (RBI) is suspected to have started selling dollars after the rupee hit an intraday low of 54.13 against the dollar in early trade, the lowest level since December 15, when it hit a record low of 54.3.
"We suspect that the RBI intervened in early trade today to aid the currency," an analyst with a state-run bank said, declining to be named.
After the intervention, the rupee strengthened to 53.67 levels.
The currency has been hurt by escalating fears over eurozone debt crisis, flagging domestic indicators, slowing overseas funds inflows and pressure from oil importers, who must exchange rupees for dollars when they buy crude.
Energy-poor India imports four-fifths of its crude oil needs.
The unit was also weakened on Monday by data showing annual inflation unexpectedly accelerated in April to over seven percent, reducing chances of swift interest rate cuts to boost slowing economic growth.
Traders say the central bank appears to have intervened to sell dollars more than a dozen times this year in a bid to curb the Indian currency's fall.
The bank has a policy of not commenting on its actions in the forex market.
The rupee was Asia's worst performing currency in 2011, losing more than 20 percent of its value in the calendar year.
But after it hit a record low in mid-December, it rebounded to 48.67 rupees in February, led by strong foreign fund buying of Indian assets, before falling again.