Rupee hits four month high against US dollar
KATHMANDU, SEP 18 -
Nepali consumers may get imported goods from third countires other than India at relatively cheaper price for the Dashin and Tihar festivals, thanks to the continued strengthening of the Nepali currency against the US dollar.
On Monday, Nepal Rastra Bank (NRB) fixed the exchange rate at Rs 86.71 against a US dollar for Tuesday, which is a four-month high against the greenback. On May 16, the dollar was traded at Rs 86.39. The dollar has weakened over the last three days after hovering around at Rs 88-90 earlier.
While a multiple of factors affect the pricing of goods, traders have predicted that the sustained strengthening of the domestic currency against the greenback would lead to the reduction of price of imported goods.
The weakening dollar has seen a sudden rise in the opening of letter of credit (LC) for the imports of goods such as garments and electronics, whose demands pick up during the Dashain and Tihar festivals.
“Although the freight charges have surged in the recent days due to price hike of petroleum products, the sustained downfall of the dollar against the domestic currency will help in decreasing the price of imported goods from the third countries,” said Surendra Bir Malakar, former president of the Nepal Chambers of Commerce (NCC).
Malakar, who also trades in imported garments and households appliances particularly from China, said that the current rate of the downfall of greenback would not have significant impact on pricing. “But the price may go down during the festival as a result of stiff competition,” he said.
There has not been significant drop in the value of the dollar but it is in decreasing trend since July 27. The value of per US dollar was Rs 90.30 on July 26 and remained below Rs 90 in the following days. The dollar had reached the highest level at Rs 91.88 on June 23 and 24.
For the last few days, the value of the greenback has slipped continuously against the Nepali currency, thanks to the latter’s pegging with the Indian currency.
According to the Indian media, IC on Monday rallied to its four-month high by gaining a hefty 51 paisa at IRs 53.79 against the dollar on persistent selling of the American currency by banks and exporters as well as foreign capital inflows.
The strengthening of domestic currency will also help Nepali industries to get raw materials at cheaper rate than before. Nepali industries usually buy raw materials with the dollar even from India. “This may give some respite to Nepali manufacturing units,” said a senior NRB official.
On the other hand, stengthening of domestic currency will affect exports, making Nepali goods more expensive in the foreign markets. “As Nepal’s export basket is too small, it will not have bigger impact on the country’s economy,” said the central bank official.
It may also affect remittance inflow as stronger domestic currency means recipient of remittance will get less in domestic currency.
Source: The Kathmandu Post
