The Indian rupee slumped on Wednesday to approach a record low, falling for a third consecutive session, as fears of continued foreign selling kept the focus on how to finance the country's record current account deficit.
The rupee tracked other emerging market currencies as new signs of a slowing Chinese growth and a deepening political turmoil in Portugal kept risk aversion high.
India's benchmark BSE index fell 1.5 percent, erasing its gains for the year, while bond prices fell. Those falls are a concern given foreign funds have sold a net of about $7.5 billion in stocks and debt since the start of June.
India's current account deficit reached a record high of 4.8 percent of gross domestic product in the fiscal year ended in March, and a weak rupee would aggravate concerns about funding.
The government is expected to soon unveil measures such as opening up more sectors for foreign investment in a bid to attract flows.
"The rupee weakness is more a function of the dollar weakening globally. The trend remains for the local currency to weaken. I do not rule out 60.80-61 levels in the near term unless some big bang reforms come," said Satyajit Kanjilal, chief executive at ForexServe.
The partially convertible rupee closed at 60.215/225, compared with its previous close of 59.66/67. The currency is not far from a record low of 60.76 hit last week.
The central bank has not been seen to be intervening heavily during the rupee's fall, instead choosing to try to curb speculation by administrative measures.
The central bank on Tuesday said it would introduce incremental provisioning and capital requirements for bank exposures to corporates with unhedged foreign currency exposures.
In the offshore non-deliverable forwards, the one-month contract was at 60.62, while the three-month was at 61.33.
In the currency futures market, the most-traded near-month dollar/rupee contracts on the National Stock Exchange, the MCX-SX and the United Stock Exchange all closed around 60.50 with a total traded volume of $6.1 billion.