KATHMANDU, Oct 27: The value of the US dollar has set a new record in the Nepali market once again.
The Nepal Rastra Bank (NRB) has set the buying price of one US dollar at Rs 134.24 and the selling price at Rs 134.84 for Sunday, marking the highest rates so far. The dollar price reached this level on Thursday, Saturday, and today. Last Friday, the buying price was Rs 134.23, and the selling price was Rs 134.83.
Since mid-May, the dollar price has been steadily increasing, repeatedly setting new records. The recent surge in the dollar's value in Nepal stems from factors related to India. The Nepali currency is pegged to the Indian currency, causing the dollar price to rise in Nepal when it increases in India. Conversely, when the dollar price falls in India, it also decreases in Nepal.
NRB officials indicate that the rising dollar price in India is influencing its increase in Nepal as well. Currently, India has adopted a strategy to boost its reserves of dollars and gold, which has led to an increased demand for dollars in the country. However, the supply remains weak. Central bank officials explain that with high demand and low supply of dollars in India, the dollar's price has risen, automatically affecting Nepal as well.
Pound, Singapore Dollar and Australian Dollar strengthen
Previously, central banks in countries such as the United States, UK, Canada, and Europe had raised interest rates on the dollar. This led to an increase in dollar ‘holding’, which affected the supply chain as well. Consequently, the dollar's price had risen in the past. Now, after India has implemented a policy to increase its dollar reserves, the price has further increased.
The rise in the dollar's value in Nepal and India also indicates a weakening of the Indian and Nepali currencies. When the dollar's value decreases, it suggests that the Indian and Nepali currencies are strengthening.
The dollar is a currency issued by the United States' central bank. Just as the NRB issues notes in "rupees," the US central bank issues notes in dollars. However, the dollar has gained international recognition for payments, a status that other currencies, including Nepal's, have not achieved.
In that case, payments for interstate and international trade, business, and the purchase and sale of goods and services must be made in dollars. Other currencies have not achieved such recognition. Additionally, the dollar is also considered a safe asset for investment. Large investors tend to buy and hold dollars. There are provisions for securing dollars when issuing notes as well. Accordingly, central banks of all countries also buy and hold dollars.
The backing of the US government provides a high level of attraction for investors in dollars. In this situation, the principles of supply and demand also influence the value of the dollar. When supply is strong, the value decreases, while a lower supply leads to an increase in value.
When the value of the dollar rises, Nepal will experience both benefits and drawbacks. The increase in the dollar's value will lead to higher earnings through remittances, foreign tourism, and exports because it results in income in dollars. In this situation, converting dollars to Nepali rupees will yield greater earnings.
However, foreign payments such as imports and foreign loans become more expensive. Nepal will have to repay tens of billions rupees in foreign loans. Additionally, the country imports goods worth Rs 1.4 trillion to Rs 1.5 trillion annually, and payment for these must be made in dollars. In this situation, experts state that an increase in the dollar's value will also raise the cost of imports and the burden of foreign debt.
Thus, an increase in the dollar's value brings both advantages and disadvantages. However, experts suggest that an overall decrease in the dollar's value would be better. They emphasize the need to strengthen the Nepali currency and assert that a sustainably strong economy is essential for achieving this goal.
