With this latest fall against the greenback, the Nepali rupees has depreciated by almost seven percent in 2009 while the depreciation has been 28.5 percent when compare to the exchange rate against the dollar a year ago.[break]
Nepal Rastra Bank, the central bank of the county, set an exchange rate of Rs 83.40 per dollar for Wednesday’s trading, 40 paisa more than the rate set for Tuesday’s trading. The buying rate per US dollar fixed for Wednesday’s trading is Rs 82.80 per dollar.
Given the fixed currency peg to the Indian rupee, any volatility in the Indian currency market directly affects the exchange rate of the Nepali rupee vis-à-vis the US dollar.
The Indian rupee had entered into uncharted territory on Friday, breaching the 52 rupee mark against the US dollar and ending the day at Indian Rs 52.05, down from Monday’s closing of Indian Rs 51.90 per dollar.
According to news agencies, growing concern over capital flight from the Indian economy due to the pessimistic performance of the Indian capital market is weakening the rupee against the US dollar. Foreigners have sold about US$ 1.7 billion worth of Indian shares so far in 2009, after withdrawing more than US$ 13 billion worth in 2008 when the rupee fell by 19.1 percent.
In a clear indication of easing liquidity, the discount rate of 91-day treasury bills declined to 5.71 percent from last week’s 7.39 percent. The money market last week experienced a light shortage of liquidity after Initial Public Offerings (IPOs) issued by Citizens Bank and Bank of Asia absorbed Rs 11 billion worth of liquidity from the market.
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