The rupee, which hit an intraday low of 160.10 per dollar, ended at 159.95/160.10, compared with Wednesday's close of 159.90/160.00. It hit a record low of 160.17 on June 20 and has declined 4.2 percent so far this year.

"There was no visible action by the central bank though they kept on checking the exchange rate on and off. There was excess rupee liquidity and short-term treasury bill rates came down," a currency dealer said.

"It looks like stability is coming. I don't think there will be rapid depreciation at least in the short term."

Currency dealers said the market had an excess liquidity of 50 billion rupees that put pressure on the short-term interest rates without much impact on the exchange rate.

They also said the last week's central bank decision on the monetary policy had little impact on the currency.

On Friday, the central bank left its key policy rates unchanged, saying the decision backed its goals for stabilising inflation and fostering sustainable economic growth.

Central Bank Governor Indrajit Coomaraswamy had told reporters that several emerging market currencies had more than the rupee, adding "if we reduce rates that would put further pressure on the exchange rate."

Sri Lanka last week raised import duties on small hybrid cars by more than 50 percent to boost revenue and curb a sharp fall in the rupee.

Coomaraswamy had said earlier that the rupee's decline was driven mainly by external factors.

Foreign investors sold government securities worth a net 259.7 million rupees ($1.63 million) in the week ended Aug. 1, bringing the outflow so far this year to 36.5 billion rupees, central bank data showed.