Rupee dips close to 96 against dollar
KATHMANDU, JUN 21 -
Records continued to tumble for the depreciating Nepali currency over the past three days as the value of the rupee plunged to an all time low on Thursday, with Nepal Rastra Bank fixing the exchange rate of Rs 95.99 to a US dollar for Friday.
The rupee ’s dip continued unabated since Tuesday. On June 12, the domestic currency traded at Rs 93.79 a dollar before recovering a little bit until June 18.
As Indian currency (IC) is weakening against the dollar, the Nepali currency, which is pegged with the Indian rupee , also faced the same fate. The depreciation of the Indian rupee on Thursday to IRs 59.53 a dollar was due to heavy capital outflows amid a high current account deficit in the Indian economy, according to Indian media.
The falling Indian rupee and a narrowing differential with US Treasury yields have hit Indian government bonds hard, spurring foreign investors to sell a net $4.7 billion over 19 sessions through Tuesday, Indian media reported.
The continued depreciation of the domestic currency has affected the economic activities of Nepal as well. Traders have already started to put their imports on hold, with bankers reporting a decrease in payments made by the Nepali traders to foreign parties.
Rajesh Kaji Shrestha, the president of Nepal-China Chambers of Commerce and Industry, said that there has been a 50-60 percent drop in opening of letter of credit, TT and draft for importing goods in the recent days. “Since the rupee has depreciated more than Rs 90 a dollar, the traders are in the wait-and-see mode,” said Shrestha, a former president of Nepal Chambers of Commerce. According to him, the traders have been focusing on clearing their existing stocks of goods and waiting for the domestic currency to appreciate.
The rupee s’ depreciation is expected to further rise the inflation in the coming days as Nepal’s imports from third country stand at as high as Rs 156 billion.
However, Ratna Raj Bajracharya, CEO of Global IME Bank, said that there has not been much drop in the opening of letters of credit. “They are hardly opening TT and draft for imports in the recent days but there is not much difference in the opening of LC as payment is normally made much later,” said Bajracharya. He also said that the remittance inflow has also increased as it guarantees better rates.
The appreciation of the dollar also means the rise in the government’s cost of debt servicing. It also increases the cost of large projects that depend on imported goods.
Source: The Kathmandu Post
