Nepali rupee plunges to record low against USD; $1=Rs 133.54

Published On: September 20, 2023 08:00 AM NPT By: Republica | @RepublicaNepal

KATHMANDU, Sept 20: The Nepali rupee fell to a record low against the US dollar with Nepal Rastra Bank (NRB) fixing the exchange rate at Rs 133.54 per US dollar for Tuesday.

Last time, the exchange rate stood at Rs 133.14 per the US dollar on October 20, 2022, show the records with Nepal Rastra Bank (NRB). Over the period, the exchange rate remained fairly stable.

Since the Nepali currency is pegged to the Indian currency, the weakening of the Indian currency against the dollar has led to the depreciation of the Nepali currency. According to Indian media, India’s demand for imported goods of late has triggered up the price of the US dollar against the Indian currency.

India is said to have stepped up to stock food following a notable fall in prices of vegetables and legumes, among others. This has boosted demand for the US dollar, while it has taken down the market price of the Indian currency.

Nepali currency depreciated by around Rs 32 per dollar in the past three and a half years. The NRB data shows that the exchange rate was Rs 101.53 per dollar in January, 2018.

According to the 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 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. Simultaneously, income in the tourism sector is expected to improve, benefiting exporters of Nepali goods, including handicrafts.

The overall impact of the rising dollar is more detrimental than beneficial for Nepal. 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, economists said.