The Kathmandu Post, 24 April 2018
Nepali currency has fallen to the lowest level in the last 13 months following depreciation in the value of Indian currency with which Nepali rupee is pegged.Nepali rupee will open for trading at 106.67 against the US dollar on Tuesday, down 77 paisa than on Monday, Nepal Rastra Bank’s reference rate shows. The rupee was last traded at this level on March 14, 2017.
The value of Nepali currency fell as Indian rupee weakened after foreign investors dumped Indian equities and bonds.
The Indian currency opened at 66.22 a dollar on Monday and touched an intraday low of 66.49 before closing at 66.48, down 0.56 percent from Friday’s close of 66.11, according to Livemint.com.
Indian rupee is weakening lately as foreign institutional investors, since the beginning of April, have sold nearly a combined $1.4 billion worth of equities and bonds on worries of hike in crude oil prices, which may raise consumer prices and lead to fiscal slippage, said Livemint.com.
The Indian rupee has fallen 4 percent so far this year. A weak Indian rupee automatically lowers the value of Nepali currency because Nepal has pegged its currency with Indian rupee.
A weak Nepali rupee benefits people who receive remittance from those working abroad.
Exporters too stand to benefit from a weak currency, as foreigners who purchase goods and services in Nepal will get more of the local currency while exchanging dollars. But Nepal has been unable to exploit the opportunity as many firms here have not been able to operate at full capacity due power shortage and other structural problems. So, weak currency is not likely to lift the country’s flagging exports.
A weak currency, however, will make imports expensive because Nepali traders have to fork out extra rupees to buy dollars to settle import bills. A high cost of import stokes inflation.