Due to the conflict between Russia and Ukraine, the Nepali rupee has been steadily losing value against the US dollar over the past few months.
For Sunday, Nepal Rastra Bank (NRB) has set the selling rate for a US dollar at Rs. 129.89, settling a new high.
On Friday, one US dollar was exchanged for Rs 129.68. As a result of the Indian currency's decline versus the dollar, the Nepali currency has also declined since it is pegged to the Indian currency.
When the dollar rises in value, only the tourism industry, exporters, and remittance sectors benefit. Although Nepal has a competitive advantage in remittances and exports, the cost of imported items appears to be high due to significant imports. With rising prices, the situation is likely to worsen. The cost of borrowing from foreign donors rises in tandem with the strength of the dollar.
The government will have to spend more Nepali rupees to pay off foreign debts, which will directly affect inflation and foreign currency reserves. As a result of the stronger dollar and greater import costs, inflation will be higher in this scenario.