Rupee plunges to another record low of 96.77

KATHMANDU, June 27:

Nepali rupee slumped to yet another low against the US dollar after Indian rupee took a beating due to heavy month-end demand for the greenback.

Nepal Rastra Bank, the central monetary authority, has fixed exchange rate of Nepali rupee vis-à-vis US dollar at 96.77 for Thursday after Indian currency plunged due to heavy buying of greenback by importers.

Indian currency was traded at 60.76 per US dollar at one point on Wednesday before closing for the day at 60.71.
Since Nepal fixes its exchange rates based on Indian currency´s position against the greenback, any fluctuation in the value of Indian rupee vis-à-vis US dollar causes Nepali currency to appreciate or depreciate.

Indian rupee has lately been losing ground as foreign institutional investors are pulling out of the country due to concerns over tapering of quantitative easing in the US which had funneled billions of dollars into the global financial system.

These outflows from equity markets have added to concerns about the funding of the current account deficit.
India is due to post current account deficit data for the first three months of the year on Friday, and any data that shows that gap has not narrowed from a record high of 6.7 percent of gross domestic product in the October-December quarter could spark more selling in domestic markets, according to Reuters.

“For now, a cautious Reserve Bank of India (the Indian central bank) is likely to remain the first line of defense,” Reuters said, adding, although the RBI was seen intervening on more than one occasion on Wednesday to stem the fall, selling dollars via state-run banks, it failed to prevent a slump.

Source: Republica