Rupee goes further down against dollar

KATHMANDU, NOV 12 -

The Nepali currency reached a 31-month low against the US dollar on Saturday. The price of the currency went up by 9 paisa to Rs 80.64 per dollar in a single day.

With the Indian currency devalued against the dollar on Friday, Nepali currency also weakened due to its pegging with the Indian rupees.

According to the Indian newspaper The Economic Times, the Indian rupee was down by 20 paise to Rs 50.37 against the US dollar in early trade on Friday on persistent dollar demand from banks and importers despite weakness of the American currency in global markets.

For Saturday and Sunday, the Nepal Rastra Bank (NRB) has set the exchange rate of Rs 80.64 per dollar. The rate was Rs 80.55 on Friday. On April 9, 2009, the Nepali rupee was at Rs 80.60 per dollar.

“As IC fell sharply against the US dollar, the Nepali rupee also dropped due to its peg with the IC,” said a senior official of the NRB. “Given the problem in European economies, the attraction of the dollar has been strong in recent days.”

Experts say that the devaluation of the Nepali currency has both good and bad effects on the economy. While on the one hand it can fuel inflation, on the other, beneficiaries of remittance will get more money. Bankers have said there has been a good growth in remittance as a result of the devaluation of the Nepali currency against the dollar.

With the central bank making progress in taming the inflation in recent months, the prices of goods imported from third countries will go up as Nepali importers have to pay in US dollars. With the central bank expanding the list of goods imported from India by paying the dollar, many goods from there are also expected to be expensive.

Strong dollar will also have a negative effect on Nepal Electricity Authority (NEA) as it has signed power purchase agreements with some hydropower companies in terms of US dollars.

Source: Kantipur