Rupee dips further; at 93.79 per dollar

KATHMANDU, JUN 12 -

The Nepali rupee sank to an all-time low with the central bank fixing the exchange rate for Wednesday at Rs 93.79 per US$ 1. The rupee has been in a continuous slide along with the Indian rupee with which it is pegged. According to the Indian media, the IC hit record lows due to heavy capital outflows amid a high current account deficit in the Indian economy.

Meanwhile, as per the records of Nepal Rastra Bank (NRB), the Nepali rupee has been devalued by 3.5 percent in the last 11 days. The exchange rate was Rs 90.60 per US$ 1 on June 1. NRB spokesman Bhaskar Mani Gyawali said the gap between demand and supply of the US dollar seen in the Indian economy had affected the exchange rate there. “As a result, the Nepali currency has been affected adversely,” he added.

The depreciation of the currency has multiple effects on the economy, according to experts. The appreciation of the greenback is expected to raise the government’s cost of debt servicing. Similarly, a stronger dollar is also expected to increase the cost of large projects, a majority of which depend on imported goods. The depreciation of domestic currency could also raise the inflation rate in the long run as third country imports will be dearer.

Ashok Rana, chief executive officer of Himalayan Bank, said the impact of a soaring dollar is yet to be seen in the banking sector. “Although the immediate impact is seen to be negligible in the foreign exchange market, it will be obvious in the days to come,” added Rana.

Rana said that the real impact of the current depreciation would be greater on the economy as the general people and traders would have to pay a higher exchange rate than that fixed by the central bank. According to him, banks’ selling rate has been fixed at Rs 93.90 per US$ 1 on average due to their commission.

Meanwhile, experts are hopeful of attaining stability in the forex market shortly. Gyaw-ali considers the rise of the dollar as a temporary phenomenon. “The trade-off between demand and supply amid a fluctuating dollar will bring the market to stability,” he said.

Source: The Kathmandu Post