The rupee fell to a new record low of 55.09 to the dollar, its fifth consecutive all-time low, as arbitrage measures taken by the Reserve Bank of India late on Monday provided only a brief sentiment boost.

At 10:05 a.m., the partially convertible rupee was trading at 54.95/00 per dollar, rebounding from the record low and strengthening from its close of 55.03/04 on Monday.

Traders said some exporters were selling dollars in the market, limiting a steeper fall, but the overall bias is still towards a weaker rupee.

The central bank said capital inflows will determine the direction of the rupee and stepped in to arrest volatility in currency movement.

The Reserve Bank on Monday excluded banks' net overnight open positions from currency futures and options segment. It also said foreign exchange future and options positions cannot be offset against OTC trades.

RBI capped the position limit in the exchanges for trading currency F&O at $100 million or 15% of the OTC market. As the risk of rupee further depreciating remains, RBI has also allowed banks to use funds from FCNR deposits for granting loans to domestic borrowers to meet working capital needs to attract overseas money.

"Demand from oil has been strong, particularly today (Monday), and the capital flows are not matching that," said Subir Gokarn, deputy governor at the Reserve Bank of India. "Ultimately, capital flows are going to be the main determinant of how the currency behaves."