The currency, which opened marginally higher on Tuesday, fell to 57.14 against the US dollar in late morning trade. At 1:52, the rupee was at 57.02 to the dollar, just 1 paise or 0.02 per cent lower than Monday's close of 57.01. It had earlier touched a day's high of 56.90 to the dollar.
Traders said any RBI intervention will be closely watched if the rupee continues its downward trajectory towards its record low of 57.32 hit on Friday.
The rupee had soared over one per cent on Monday in anticipation of strong measures, but trimmed more than half its gains after the RBI announcement, disappointing investors who had expected bolder measures (Read: RBI announces steps to boost rupee, economy)
The INR has been hitting a string of new lows as concerns about Indian and world economy plague the currency. It hit a new lifetime low of 57.33 to the dollar on Friday. Broad gains in the dollar versus major currencies on the back of global risk aversion and weakness in domestic shares too weighed on the rupee. Dollar buying from oil firms and gold importers added to the downward pressure, traders said. The rupee has now fallen over 21 per cent in the last one year and nearly 7 per cent in 2012.
Also Read: Rupee fall - 10 industries that will be most affected
The central bank announced a handful of measures on Monday that would allow companies to borrow more from overseas to pay back their high cost rupee loans. It has also allowed increased the limit on foreign investment in government bonds by $5 billion to $20 billion. (Read More)
However, markets were disappointed as they were expecting bolder steps to curtail rupee depreciation and a slowing economy. ‘Much ado about nothing’ said a note by a foreign bank, to its clients soon after the announcements by the Reserve Bank of India. (Read Why)
The RBI, last week, had also written to oil companies to source 50 per cent of their dollar needs from state-owned banks in a bid to support the rupee. However, no decision has been taken yet, sources said.
However, analysts said these sorts of measures would provide only stop-gap relief and that India needed to improve its economic fundamentals, including addressing its current account deficit, to bolster the rupee.
"The problem with the rupee is fundamental, and technical measures cannot be supportive over a longer period of time," said Sanjay Mathur, an economist with Royal Bank of Scotland in Singapore.
"But it is also important to note that all the India-centric factors for the fall in the rupee, like lack of reforms, has been priced in. Further weakness will be because of the global risk-averse sentiment," he said.
Credit rating agencies Fitch and S&P too warned about a paralysis in policy making affecting the country. While GDP slowed to 5.3 per cent in the fourth quarter of FY12, inflation has been persistently over comfortable levels.
With inputs from Thomson Reuters