The Reserve Bank of India (RBI) sold only a net $50 million in June, compared with $485 million in the previous month, data from the RBI showed on Friday.
The RBI sold $700 million in June, while it bought $650 million, marking its smallest net intervention in a month at least since April 2011, the data showed.
The rupee had staged a sharp recovery towards end-June after touching a life-low of 57.32 a dollar on June 22.
At 4.30 p.m. the local currency was changing hands at 55.30/31 to a dollar in the secondary market.
The central bank also rolled over forward dollar contracts by purchasing $810 million in June, the data showed.
In the forward dollar market, outstanding dollar sales rose to $14.08 billion in June from $10.31 billion in May, RBI data showed, indicating the central bank's preference to intervene in the forward markets to prevent the rupee liquidity from tightening further in the spot market.