KATHMANDU, Sept 7: The value of Nepali currency has plummeted to a record low against the US dollar in line with the Indian currency rout.
According to the reference rate set by the Nepal Rastra Bank (NRB) for Friday, rupee will trade at 115.48 against greenback. This is the breach of the record of Thursday when U$ 1 dollar was worth Rs 115.11.
The strengthening US dollar follows the rapid depreciation of Indian rupee with which Nepali currency is pegged. Due to the currency pegging, Nepal is left with no measure to stabilize the freefall of its currency.
Weaker Nepali currency means surge in import bills which puts pressure on inflation. While the devaluation of domestic currency is a boon for export, low production capacity of the country means the country cannot reap much benefit. Tourism sector also stands to gain from the slump of Nepali rupee as tourists will have more spending capacity from the same budget they plan to spend in Nepal.
Similarly, the remittance-receiving households are also going to benefit from the appreciation of the US dollar as they will receive more local currency from the US dollars that their family members abroad send.
However, it will be expensive for the country to service foreign debt as the government will have to fork out more local currency to repay foreign loans.