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 India's benchmark 10-year bond yield dropped to its lowest level in six weeks while the rupee remained near record lows on Wednesday as fears of a global recession hit investor sentiment ahead of the release of the U.S. Federal Reserve's June meeting minutes.

The 10-year bond yield was trading down 9 basis points on the day at 7.30% by 0713 GMT after falling to a session low of 7.28%, its lowest since May 26.

Benchmark U.S. Treasury yields tumbled to one-month lows overnight and a key part of the yield curve inverted for the first time in three weeks as economic worries dented risk appetite and increased demand for safe-haven U.S. debt.

"The U.S. Treasury yields have dropped sharply, so our markets are just following that. Recession fears are turning real and everyone is now waiting for the Fed minutes to get some clarity," a senior trader at a foreign bank said.

The partially convertible rupee was at 79.31/32 per dollar after falling to the day's low of 79.3675 which was just shy of the record low of 79.3750 touched on Tuesday.

Traders said intermittent dollar selling by the central bank and stronger domestic equities were preventing a sharper and quicker slide in the rupee but most market participants and analysts expect the rupee to touch 80/dollar levels in the next few weeks.

"The price action overnight and this morning does suggest that Asian central banks are around selling US Dollars," said Jeffrey Halley, senior market analyst, Asia Pacific, at OANDA, in a research note.

"But with Asian currencies gaining no solace from lower US yields, this looks very much like a risk aversion move that will keep the pressure up on local currencies".

Foreign investors turned net buyers of shares on Tuesday, having purchased $163 million, but they have sold more than $30 billion since the start of 2022.

The Fed will release minutes from its June meeting on Wednesday, which investors will scrutinise for clues on the size of expected rate hikes over the coming months.

The Fed is widely expected to hike rates by 75 basis points for the second meeting in a row when it meets on July 26-27.

That would widen the interest rate differential with India and lead to further foreign investor portfolio outflows.

The dollar stood tall on Wednesday, holding at a 20-year peak against the euro and multi-month highs against other major peers due to safe-haven demand. [USD/]

Concerns over India's widening current account deficit, high domestic inflation and sustained portfolio outflows are expected to weigh on the rupee in the months ahead.