KATHMANDU: Nepali currency plunged to a record low against US dollar on Tuesday as Nepal Rastra Bank (NRB) fixed the selling exchange rate at Rs. 124.25 per dollar.
Earlier on March 8, 2022, the US dollar appreciated at its highest level against the Nepali Rupee at Rs. 123.44 per dollar.
Then after, with the fluctuation, the exchange rate of a US dollar dropped to Rs. 120.88 on April 6, 2022.
Under the current system, the exchange rates quoted by different commercial banks may differ, the NRB said.
Nepali rupee has continuously depreciated against the US dollar for the last few weeks and a historic record today.
Nepali currency has come under pressure owing to the devaluation of the Indian rupee with which it is pegged.
The Nepali rupee has a fixed exchange rate of Rs. 160 for IRs. 100.
The Nepali rupees has once again become weaker against the US dollar for the last few months owing to increasing demand for dollars in the international market, said economist Dr. Chandra Mani Adhikari.
“Demand for the dollar has risen since the US Federal Reserve raised its base rate by 0.5 percent. Foreign investors are encouraged to invest in the US economy more than others, so the US dollar continues to strengthen around the world,” he said.
Owing to the present war between Russia and Ukraine and its impact will be seen in the world economy, foreign investors are investing in dollars as a secure and quality asset which is also the cause to increase the value of US dollar, said Adhikari.
He said that the dollar would further strengthen as the US economy is improving more than other economies.
According to him, improvement in the exchange rate of the dollars with Nepali rupee will negatively hit Nepali economy at a time when it is trying to emerge from COVID-19 pandemic.
The depreciation would directly trigger inflation as import cost of goods would be higher, he added.
Nepal will face an additional burden on the repayment of principal and interest of foreign debt due to the increasing exchange rate of the US dollar, he said.
“Nepal will benefit from an improved exchange rate of dollars if exports increase. But, Nepal’s exports to the third countries have not expanded in terms of value, even increased over the months. Due to the import-based economy, consumers would be more affected from the devaluation of Nepali rupee as the price of imported goods will be higher,” he said.
He said the rising prices of goods would hit consumers directly. “Rising value of US dollar will affect the foreign currency reserve severely as the foreign currency reserve of the country has already dropped significantly,” he told The Rising Nepal.
However, the NRB has tightened imports as foreign exchange reserves fall short of targets. The NRB has also banned the import of various goods under 10 different groups.
He said that the government should focus on the promotion of the tourism sector to take advantage of the strengthening dollar. (TRN)
