On Monday, Nepali currency was traded at Rs 79.40 against a US dollar - down 0.36 percent - from Sunday´s Rs 79.11.[break]
The latest fall comes two days after the Nepali currency shed 2.13 percent against the greenback, recording a sharpest decline in 29 months.
Nepali currency has depreciated 4.6 percent in the last eight days as investors in India pulled the money out of the country, following growing demand for the greenback in Europe, where some of the countries facing sovereign debt crisis are demanding additional funding. India, on Thursday, tried to boost market confidence by releasing more dollar in the market but the government initiative failed to prop up Indian currency´s value. Since Nepali currency is pegged with Indian currency, any fluctuation in Indian rupee affects exchange rates in Nepal.
The latest loss in the value of Nepali currency is expected to raise prices of goods imported from third countries like Thailand as Nepali traders will have to pay more Nepali rupee to buy each US dollar, a high-ranking official of Nepal Rastra Bank said on the condition of anonymity. “But it will not affect imports from India as Nepali currency is pegged with the Indian rupee,” the official said. There´s a caveat though - prices of oil may go up as India itself imports huge quantity of the commodity from foreign markets.
A weak domestic currency, however, is expected to benefit exporters as they can get more of Nepali currency by exchanging each dollar.
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