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The Indian rupee slid the most since December as uncertainty over a potential announcement on the troubled Jammu and Kashmir state added to a yuan-driven sell-off.

The rupee fell as much as 1.4 per cent against the dollar, the most since December 11, before paring the loses to 1.2 per cent or 70.4650 to the dollar at 9:47 am.

India has deployed extra troops in Jammu and Kashmir amid rising talks that Prime Minister Narendra Modi's government is preparing to change laws that give the state a special constitutional status. The yuan plunging beyond 7 per dollar for the first time since 2008 amid speculation Beijing was allowing currency depreciation to counter President Donald Trump's latest tariff threat is triggering further uncertainties in the market.

"The worries over the political situation in Kashmir and the yuan depreciation are weighing on the currency," said Paresh Nayar, currency and money markets head at FirstRand Ltd. in Mumbai.