The Reserve Bank of India (RBI) sold $785 million and did not buy any dollars in July, compared with net sales of $50 million in the previous month, data from the central bank showed on Wednesday.
The rupee started July with strong gains against the U.S. dollar, but the rally started to fizzle out towards the second half, with the rupee closing down 0.1 percent for the month against the greenback.
On Wednesday, the rupee closed at 55.21/22 to a dollar in the secondary market.
In the forward dollar market, outstanding dollar sales rose to $14.46 billion in July from $14.08 billion in June, 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.