The Indian rupee has fallen to an all-time low against the dollar, in a tough week for emerging market currencies amid investor concerns about a potential trade war.

The rupee fell to 71.785 per dollar on Wednesday, although it recovered somewhat to trade at 71.915 to the dollar in early Thursday trading.

This follows a previous drop to a record low of 69.62 rupees per dollar last month, in the wake of the Turkish economic crisis.

Decline in the rupee came as investors abandoned emerging market assets - EM equities entered a bear market this week, marking a 20 per cent decline from their peak in January.

“Investors who have been on the sidelines may think of the selloff as a good opportunity to start accumulating some oversold emerging market assets,” said Hussein Sayed, chief market strategist at FXTM.

“However, the prospects of more US interest rate hikes, and continuing global trade tensions make it difficult to jump in.”

President Trump is expected to announce another round of tariffs on $200bn (£155bn) worth of Chinese goods in the coming days.

“Going ahead with these tariffs (will) suggest that a full-blown trade war has just kicked off and more pain will be felt across the globe,” Mr Sayed added.

John Ferguson, global economist at The Economist Intelligence Unit, said: “Most emerging-market economies should be able to weather this pace of economic tightening, provided that their trading conditions remain favourable. However, investors are on the alert for financial, economic or political weaknesses.”

“The turbulence experienced by Argentina and Turkey in mid-2018 is a reminder of how difficult it can be for policymakers to regain market confidence where external imbalances are large and macroeconomic policy frameworks are fragile.”

Mr Ferguson added: “For now, a full-blown emerging-market crisis should be averted, but we expect the number of countries seeing their currencies come under pressure to rise over the next two years. It is likely that we will see periods of volatility as the global trade dispute interacts with the shift away from easy money.”

Meanwhile, Fiona Cincotta, senior market analyst at City Index, noted that the selloff in emerging markets has spread beyond Turkey and Argentina to some of the developing world’s largest economies such as Russia, Mexico, Indonesia and South Africa - the rand dropped on Wednesday after it emerged the South African economy had entered recession.

“These economies are seeing a sharp selloff in both stocks and currencies which is unnerving investors, with fears of contagion sending European shares lower and contributing to a softer open on Wall Street,” said Ms Cincotta.