KATHMANDU, March 21: The Nepali currency has dropped to a historic low against the US dollar after Nepal Rastra Bank (NRB) fixed the exchange rate at Rs 150.24 per US dollar for Saturday.
As per the NRB records, the price of a US dollar stood at Rs 148.52 on Friday, which jumped by Rs 1.72 to reach the new record on the following day. The price of the US dollar has been in steady growth since the beginning of the current fiscal year. It has been stronger by around Rs 13 against Nepali rupee since July, as the price increased from Rs 137.35 per dollar to over Rs 150 per dollar in the past eight months.
As Nepali currency is pegged with the Indian currency, the weakening of the Indian currency against the dollar has led to the depreciation of the Nepali currency. According to an Indian media, Indian currency started to dwindle since the US-Iran war broke out.
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Over the period, the Indian currency has slumped more than two percent. “India’s rupee fell about 0.7 percent to 93.2750 against the US dollar, eclipsing its previous low of 92.63 hit on Wednesday,” reads the Economic Times.
According to NRB officials, the weakening of the domestic currency could prove to be a boon for remittances, tourism and exports, among other sectors where the earnings are in the US dollar. A stronger dollar can provide some relief to Nepal's export trade, although the limited volume of goods exported makes it challenging to fully capitalize on the exchange rate advantage. Similarly, income in the tourism sector is expected to improve, benefiting exporters of Nepali goods, including handicrafts.
However, being an economy with high reliance on imported goods, the domestic market could be affected by higher prices for goods purchased in dollars from abroad. It increases the market price of goods as the country imports most of the raw materials including the capital goods necessary to produce finished goods, according to economists.
Likewise, the soaring price of the US dollar also increases the liabilities of debt burden for the country. Since a substantial portion of Nepal’s external debt is denominated in US dollars or the International Monetary Fund’s Special Drawing Rights (SDRs), exchange rate fluctuations directly affect the total debt burden.
Along with the price of the US dollar, a number of other convertible currencies also appreciated in a day. According to the NRB, the exchange rate of a euro increased to Rs 173.81 from Rs 170.37, a pound sterling increased to Rs 201.81 from Rs 197.19 and the Australian dollar increased to Rs 106.31 from Rs 104.54.
