Rupee hits historic low of 108.90 per dollar, will it cross 115 ?

The Nepali rupee plunged to an all time low of Rs 108.90 against the US dollar today after the Indian rupee sank to the record low of Rs 68.75.
The central bank today morning revised the foreign currency exchange reference rate for selling at Rs 108.90 vis-à-vis US dollar in the morning for today’s trading, making a US dollar Rs 10 expensive in a month.
Earlier yesterday evening, the central bank had fixed the reference selling rate of the US Dollar at Rs 105.35 for today.

The central bank fixed the reference exchange rate twice today – most probably for the first time – once in the morning for today and another in the evening for tomorrow.

The exchange rate of the morning at Rs 108.90 has been revised to Rs 108.60 in the evening for tomorrow, after the Indian currency made some gain in the evening. Experts claim that the Nepali rupee is going to slip as low as Rs 115 against a US dollar as there is less chances of Indian rupee – against which Nepali rupee is pegged – to gain.

Despite several measures by the Indian government and Reserve Bank of India (RBI), there is a less chance of the Indian rupee strengthening heavily in the context of the election year – that is 2014 – in India when major policy decisions for reforms are unlikely to be taken. “Foreign investors have little confidence on Indian economy and they are unlikely to return any time soon, gold imports likely to go up and deficit usually go up in the election year,” according to the reports.

But the remittance-based economy can neither benefit nor lose from the current currency volatility as the increased remittance in flow will also be eaten by the increased price of the imported goods, though the poors will suffer due to rising inflation that could not be checked by either central bank or the government.

 The Nepali rupee depreciation against the greenback could be beneficial had Nepal been able to export over Rs 100 billion, but the country’s export basket is too small to take benefit from the rising US dollar. The country had exported Rs 76.92 billion worth merchandise in the last fiscal year, whereas the imports stood at Rs 556.74 billion.

Though, the importers have cut down imports by two-thirds and are still waiting for the Nepali rupee to stabilise, the import bill of the petroleum products – that is the single largest commodity import – will anyway increase hitting the market price that is already going up due to weak rupee.

The poors are going to suffer anyway as all the other currencies against Nepali rupee have been gaining pushing the Nepali rupee to its lowest ever that is going to increase poverty incident in the current fiscal year in the country.