Asian shares dropped the most in nine months while the yuan broke the 7 per dollar support level amid mounting trade tensions.

The partially convertible rupee was at 70.47/48 per dollar at 0558 GMT after dropping to 70.6050 earlier, its weakest since March 6.

"This downward momentum in the INR could continue this week," HDFC Bank said in a note.

"We have been highlighting that the INR is at risk of a correction and the trigger has been the US-China trade war. Brace yourself, past trends show that movements in the INR tend to be sharp and quick in such instances."

The benchmark 10-year bond yield was up 5 basis points at 6.40% after rising to 6.42% earlier. The broader NSE index was down 1.6%. For the stocks report, see:

Traders said the rising tensions in the northern state of Jammu and Kashmir were also a factor being closely monitored apart from the monetary policy committee review on Aug. 7.

Phone and internet services were suspended in Kashmir and state leaders placed under house arrest, deepening fears that Prime Minister Narendra Modi's government plans to weaken the special rights of residents in the disputed region.

Investors have already factored in a 25 basis point cut in repo rate when the Reserve Bank of India reviews policy on Wednesday.

"RBI rate cut is factored in, so the downside for yields is very limited from here. With the current state of the economy, 25 bp (cut) may not be enough, so the statement will be key for markets," said the head of trading at a private bank said.