Nepali rupee weakens further

By A Staff Reporter,Kathmandu, Feb. 7: The Nepali rupee continues to depreciate against the U.S. dollar. The Nepal Rastra Bank (NRB) Thursday fixed the exchange rate of one U.S. dollar at Rs. 140.25.

The exchange rate of the US dollar against the Nepali currency has been rising for the past few months, and on Thursday, the Nepali currency plunged to a record low-- at Rs. 140.25 for one dollar. 

Under the current system, the exchange rates quoted by different commercial banks may differ, the NRB said. 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.

“Due to high demand for US dollars in India, the Indian currency has become weak against the US dollar, which has led to a decline in the value of IC. This has had an impact on the Nepali rupees as well,” said Economist Dr. Chandra Mani Adhikari.

He said that the exports of India have also decreased which led to a decline in the foreign currency reserves at the Reserve Bank of India (RBI) which also resulted in the depreciation of IC against the US dollar.

The devaluation of IC against the US dollar will affect Nepal’s economy, he said. The devaluation of Nepali rupees will directly hit inflation and foreign currency reserves as the government has to spend more Nepali rupees to pay foreign loans and interests, he said.

Economists argue that the depreciation of the Nepali currency against the dollar will directly trigger inflation as the import cost of goods will be higher.

The weakening of the domestic currency could prove to be a boon for remittances, tourism and exports, among other sectors, where the earnings are made in the US dollar.

The improvement in the exchange rate of the dollar may, however, result in the swelling of the remittance inflows.