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The Indian central bank was likely selling dollars to support the rupee after the local currency hit its all-time low on Tuesday, pressured by a Chinese yuan-led decline in Asian currencies, four traders told Reuters.

The rupee weakened to a low of 84.40 per dollar in early trading, eclipsing its previous record low of 84.3925 hit in the previous session. The currency was last flat at 84.3925.

State-run banks were spotted offering dollars near 84.40 levels, most likely on behalf of the Reserve Bank of India, said the traders, who declined to be named as they are not authorised to speak to the media.

The dollar index was up 0.1% at 105.6, hovering close to its four-month high hit on Monday. Asian currencies were down between 0.1% and 0.6%, with the offshore Chinese yuan weakening to an over three-month low.

The RBI is "likely to defend 84.40 in the near-term but it (USD/INR) should gradually move higher to 84.50," a trader at a mid-sized private bank said.