The Nepali rupee has, of late, depreciated against the U.S. dollar. The Nepal Rastra Bank (NRB) Wednesday fixed the exchange rate of one U.S. dollar at Rs. 124.41. The Nepali currency plunged to a record low against the US dollar today.
Earlier, the US dollar appreciated at its highest level against the Nepali Rupee at Rs. 124.25 per dollar on May 10, this year. Under the current system, the exchange rates quoted by different commercial banks may differ, the NRB said.
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 US dollar becoming strong over the months due to the improvement of the US economy, said Dr. Gunakar Bhatta, spokesperson at NRB.
“As the US economy continues to recover, 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.
The main reason for the strength of the US dollar is the ongoing war between Russia and Ukraine as foreign investors continue to invest in dollar as a safe and quality asset, he said.
He noted that the recent rise in interest rates by the US Federal Reserve has helped strengthen the dollar in international markets.
He said that the rising rate of the dollar would have multiple negative effects in the country as Nepal has to spend more for imports of many products including petroleum products.
“The devaluation of Nepali rupees will directly hit inflation and foreign current reserves as the government has to spend more Nepali rupees to pay foreign loans.
Inflation will be higher during the situation as the price of imported goods will be higher due to a stronger dollar,” he said.
The foreign currency reserve would be affected in this context as the exchange rate of dollar has been increasing and the source of foreign current earnings such as remittance, tourism and export sector could not increase as expected, said Dr. Bhatta.
Source : TRN,
