Tuesday, December 13, 2011

Nepali rupee drops to another historic low versus dollar

The weakening Indian rupee has once again brought the Nepali rupees to historic low against strengthening US dollars.
Today, exchange rate of Nepali rupee crossed Rs 85 for a dollar on an average as per exchange rate fixed by different commercial banks. Indian rupee with which Nepali currency is pegged had reached historic low today at Indian Currency 53.40 per dollar.
However, the Indian foreign exchange rate redeemed itself a little reaching IRs 53.18 by the mid-afternoon. The peg with Indian Currency has got Nepali Currency sliding along in spite of having not much direct relation with the appreciating dollar. The worsening Eurozone situation has strengthened dollar against its major rival currency -Euro that in turn even appreciated dollar against Indian Currency. But the remittance dependent Nepal will see the remittance inflow to grow heftily in the near future thanks to strengthening dollar as most of the workers are paid in dollars, the dollar inflow grows even if the number of migrant workers and their income remain static
The first flush of appreciating dollars has already been reflected in the first quarter remittance income of Nepal that has shot up by 28.3 per cent amounting to Rs 253 billion.
Likewise, tourist industry can be expected to see a boost thanks to strong dollars as traveling to Nepal will be less expensive affair to the tourists
Especially tourism in India can be expected to boom due to weakened IC and a portion of the foreign tourists that visit India is estimated to visit Nepal as well. On the other hand, traveling abroad for Nepali people has become an expensive affair. Especially the students outbound to USA for higher studies have been victimised by the strong dollar.
On the trade front, the strong dollar means the amount of Nepali rupees required to pay for goods and services bought in dollars that was sufficient a month ago will fall short at the current rate. The merchandise and service import paid in dollars will be expensive for Nepali people if the dollar keeps appreciating. It might even lead to inflation which has already become a Herculean task for the monetary authority due to internal supply situation.
Nepal imported goods worth Rs 133.27 billion paying in dollars in last fiscal year from third countries along with the imports worth Rs 47.8 billion from India that has been paid in dollars. The export from Nepal to third countries only amounted to Rs 21.2 billion in the review period.
The appreciating dollar will make debt servicing a difficult task for the government with the current designated amount of Rs 20.3 billion.

Dollar Exchange Rate
2007-11-18 — Rs 62.90
2009-03-11 — Rs 82.70
2010-05-03 — Rs 70.65
2011-11-23 — Rs 83.60
2011-12-13 — Rs 85
(Source: Nepal Rastra Bank)


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