By Laxman Kafle Kathmandu, Oct 12 : Nepali rupee has continuously depreciated against US dollar for the last few days. Nepal Rastra Bank has fixed the selling exchange rate of one US dollar at Rs 120.28 for Monday.
Nepali rupee on Monday depreciated to a six-month low against the US dollar. It had reached Rs. 120.32 on April 26, 2021. Earlier, Nepali rupee plunged to an all-time low against the US dollar with NRB fixing the exchange rate at Rs. 122.50 on April 9, 2020. Under the current system, the exchange rates quoted by different commercial banks may differ, the NRB said.
In the last four months, Nepali rupees has depreciated by Rs. 3.8 per US dollar. As of June 1, 2021 a dollar could fetch Rs. 116.48.
Nepali currency has come under pressure owing to the devaluation of the Indian rupee with which it is pegged. The Nepali rupee has a fixed exchange rate of Rs. 160 for IRs. 100. The Nepali rupee has once again become weaker against the US dollar lately owing to slow down of the Indian economy, said Narayan Prasad Pokhrel, information officer at NRB. The depreciation of the Nepali currency against the dollar would directly trigger inflation as import cost of goods would be higher, he added.
“Nepal benefits from a reduction in the value of the dollar rather than a rise. Although remittance income is affected by the depreciation of the dollar, most others benefit,” he said. The US dollar is becoming stronger in the international market due to increase in its demand as the foreign investors are investing in dollars as safe investment, said economist Dr. Chandramani Adhikari.
He said that the dollar would further strengthen as the US economy is improving more than the other economies.
Nepal will face an additional burden on the repayment of principle and interest of foreign debt due to the increasing exchange rate of the US dollar, he said.
"Nepal will benefit from an improved exchange rate of dollar if exports increase. But, Nepal's exports to the third countries have not expanded in terms of value, even increased over the months. Due to the import-based economy, consumers would be more affected from the devaluation of Nepali rupee as the price of imported goods will be higher," he said.
Besides, the appreciation of the dollar will also hit the development works and increase their cost as the country is compelled to import almost all the machinery and other equipment related to construction paying a high price.
The devaluation of Nepali rupees also results in inflation while the cost of transportation has increased because of the increase in the prices of fuel, he said. “It is a must to restrict the import of luxury goods and unnecessary items in this crisis to maintain foreign currency reserve,” he said.