Rupee at another historic low against dollar
KATHMANDU, AUG 17:
The US dollar’s exchange rate is less than a rupee shy of reaching Rs 100, as the Nepali rupee headed towards a never-seen-before low.
The Nepali currency is going through an agonising downhill trek as the Indian currency — with which the Nepali currency is pegged — could not save itself from a free-fall today in the forex market.
The reference rate determined by Nepal Rastra Bank stands at Rs 99.02 as selling rate, for tomorrow and Sunday, based on today’s forex trading. Likewise, NRB fixed the buying rate for dollar at Rs 98.42 for tomorrow. The Nepali currency has depreciated by more than 10 per cent in the last one year.
Though the Nepali economy has nothing to do with the depreciation in its currency, back here at home, the strong greenback has started to affect everyone. Nepal Oil Corporation recently increased fuel prices following the appreciating dollar and also due to rising global oil prices. Likewise, last fiscal year, the year-on-year rate of increase in the price index of imported goods was recorded at 8.4 per cent.
Meanwhile, households that receive remittance income must be dancing their way to the bank or remitters’ counters. The expensive dollar has increased the salaries and wages of every worker working abroad in terms of Nepali rupee. However, paying for tuition fees and accommodation of students studying in foreign countries will be a bit difficult.
Likewise, importers have to pay more for goods manufactured abroad. Consequently, imported products have already become expensive — from consumer goods such as apparels and shoes to larger infrastructure materials.
Though Nepali exporters will earn more for the same quantity of exports due to the strong dollar, a larger impact is unlikely because Nepali exports are small in quantity.
Until and unless the Indian government and its central bank’s measures to arrest the freefall of the Indian currency starts to work, the Nepali currency will be going down.
The Indian currency that has become Asia’s worst-performing currency this year fell to IRs 62.03 level in intra-day trading. The Indian government had put restrictions on investments by Indian citizens and companies in foreign countries to reduce pressure on the rupee. Likewise, it had also banned imports of gold coins and medallions.
However, worldwide ‘panic selling’ following short position on Indian currency further deteriorated its value. On the other hand, the dollar is getting firm against all the other Asian currencies. The cheerful employment data and improving consumer sentiments in the US have strongly suggested that by the next month the US Federal Reserve will start withdrawing its asset purchases. This will further pull foreign investments out from India, thus pushing the Indian currency further down.
Already in June and July, foreign institutional investors have taken back $10.5 billion from Indian capital market. Such pull outs not only affected stock market but also depreciated the Indian currency.
Source: THT
