Dollar drops to six-month low

The exchange rate of the US dollar reached Rs 83.34 today – the lowest in six and a half months – due to the sustained appreciation of the Indian currency (IRs).
The central bank has fixed the exchange rate for the dollar at Rs 83.34 for today.

With the increased capital inflow to India, the Indian currency – with which the Nepali currency is pegged to – has continued to head up reaching IRs 52.39 by today's closing in the forex markets. Earlier, the plunging Indian currency had pulled the Nepali currency to Rs 91.28 for a dollar – the highest ever in late June.

However, monetary intervention by Reserve Bank of India (RBI) saved the Indian currency from plunging further. RBI controlled the arbitrage and speculation in futures and options markets, and ordered exporters to repatriate Indian currency from abroad instead of holding dollars.

Moreover, India's widening trade and current account deficits coupled with declining foreign fund inflows have depressed the rupee. India's recent steps like removing subsidy on fuel and allowing foreign investment in retail stores and aviation has sparked global confidence in the Indian currency once again, further propelling its rise.

The weak dollar against the Nepali currency means imports will be relatively cheaper while exports will be expensive. Likewise, cheaper dollars mean shrinkage in size of the remittance coming to Nepal from migrant workers.