KATHMANDU, June 22 : The Nepali rupee on Friday recorded an all-time low, with Nepal’s central bank fixing the exchange rate at Rs134.15 per US dollar, media reports said.
The Nepali currency was weakened by 31 paisa against the dollar in a single day. The rupee’s fall is attributed to a steady depreciation of the Indian rupee, to which it is pegged, according to The Kathmandu Post.
Experts say Nepal, an import-driven economy, may see a sharp rise in inflation due to the dollar’s strength, as almost all goods and services are quoted in dollar terms.
Commodities like edible oil, petroleum fuel, and foods are priced in dollars globally, so a stronger dollar adds to the cost of Nepali consumers.
As food expenditures make up large shares of consumption, the constant weakening of the local currency makes the goods dearer in Nepal.
Traders say apparel prices may rise in the upcoming festival season as they have started to place orders.
Kumar Karki, President of the Nepal National Traders’ Federation, said the rising dollar may make goods, particularly apparel and electronics, more expensive during the Dashain and Tihar festivals.
According to estimates, sales of food and non-food items surge manifold during the festival period.
According to media reports, the dollar strengthened as the Swiss National Bank delivered an interest-rate cut, underscoring the divergence in monetary policies among global central banks as the US Federal Reserve delayed easing policy.
In India, the central bank has allowed the rupee to weaken, though it intervenes to curb wild swings.
Nepali currency automatically strengthens when the Indian currency is strong and weakens when the Indian currency weakens.
Nepal has been following a pegged exchange rate system with the Indian rupee.
Nepal adopts a different kind of exchange rate system for other convertible currencies.
In line with the economic liberalisation policy introduced in the mid-1980s, Nepal introduced current account convertibility in 1993, effectively pegging the Nepali rupee to the Indian rupee at the rate of 1.60, the same rate as in 1960 when the two currencies were first pegged.
Since 1993, the exchange rate of the Nepali rupee with other convertible currencies has been market-determined in line with the exchange rate of the Indian rupee with convertible currencies.
(UNI)
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