The rupee plunged to a new low of 55.87 in the early Wednesday trade, marking its sixth consecutive record low against the US dollar.
The new low spurred the Reserve Bank of India to intervene, with the central bank selling dollars starting from the 55.75 rupee level, traders said according to media reports.
RBI intervention during Wednesday's trading session pushed the rupee to 55.52 but dropped to 55.87 later, NDTV said. Tuesday's trade saw the rupee closing at 55.39/40 to the dollar.
The currency's progressive fall in the past couple of days has drawn attention from the government, with Finance Minister Pranab Mukherjee saying on Tuesday that the centre is keeping a close watch on the situation and that necessary measures are taken to tackle the rupee's impact on the foreign exchange market.
"Global slowdown due to unfolding of eurozone sovereign debt crisis has, inter-alia, impacted the Indian economy through deceleration in exports, widening of trade and current account deficit, decline in capital flows, fall in the value of Indian Rupee, stock market decline and lower economic growth," Mukherjee told the Rajya Sabha.
Mukherjee assured that the RBI is intervening in the Forex market to help curb volatility.
"Raising of NRI deposit interest rates, easing availability of export credit and stipulation that 50% of balances in the Exchange Earner's Foreign Currency Account be converted into rupees balances", are some of the measures being adopted by the central bank, he said.
The finance minister also added that the centre is working towards boosting India's infrastructure sector by increasing direct foreign investment. Other steps include "liberalization of external commercial borrowings (ECB) policy and portfolio investment norms besides steps to improve access to corporate bond market through Infrastructure Debt Funds."
"A number of legislative measures/amendments have also been taken for fiscal consolidation/reforms and financial sector reforms", Mukherjee noted.