Nepali rupee hits one-month high of 100.49

KATHMANDU:

Nepali rupee has jumped to a near one-month high as the Indian currency gained some strength on indications that the US would give continuity to easy monetary policy for some time.

Nepal Rastra Bank, the central monetary authority, will sell each dollar for Rs 100.49 on Tuesday, as against Rs 101.89 on Monday, the highest since August 19.

Nepali currency has been recovering since it plunged to an all-time low of Rs 109.03 on September 4, as Indian currency, with which Nepali currency is pegged, has started gaining some weight.

Indian rupee got a lift this time as news that Lawrence Summers dropped from the race to head the Federal Reserve promised to prolong the lifetime of super-easy money, hurting the US dollar, Reuters said.

The Indian currency has been on the recovery track since Raghuram Rajan, the new Indian central bank governor, assumed office on September 4 and announced a series of measures to boost the currency.” Since that time, the Indian currency has gained 7.6 per cent.

But many say the strength gained by Indian currency would be short-lived as rampant hike in consumer prices are expected to put a strain on the economy.

India’s headline inflation shot to a six-month high in August, driven by a 245 per cent annual jump in onion prices, Reuters said. At a time when inflationary pressure is mounting, the Indian government is said to be mulling over raising diesel prices by around 10 per cent to lower its oil subsidy burden. This is also expected to fuel inflation, which may have undesirable consequences.

“Monday’s rally was only a knee-jerk reaction and markets would again start focusing on the domestic fundamentals soon, which would keep trade choppy heading into the central bank’s monetary policy decision on Friday,” Reuters said quoting Indian traders.

Source: THT