The currency was quoted at 1,031.60 per dollar as of 0500 GMT, compared to Monday's close of 1,042.
90. Earlier Tuesday it rallied as high as 1,025.
33, its strongest since June 23.
"Foreign exchange authorities are known to have sold up to two billion dollars to support the won," Citibank dealer Oh Suk-Tae told AFP.
The currency has fallen more than 10 percent against the dollar so far this year, making imports more expensive and putting upward pressure on inflation.
The finance ministry and the central bank jointly warned Monday that they would use foreign exchange reserves to support the won.
South Korea, Asia's fourth largest economy, imports virtually all its oil needs and has been hit especially hard by soaring crude prices.
Annual inflation rose to 5.5 percent in June, close to a 10-year high.
Analysts say intervention may not dampen the strong appetite for the dollar because foreign investors are unwinding holdings in emerging markets -- betting that growing inflation risks