Rupee hits yet another low against dollar

It takes Rs 100 to exchange $1 as the greenback today strengthened against the Indian Rupee with which Nepali rupee is pegged at.

The central bank today fixed Rs 99.02 reference selling rate for a US dollar which has appreciated by more than 10 per cent in the last one year.

Though the weakening Nepali rupee could help boost remittance inflow and exports earnings, the import-based domestic economy could not take any benefit from the free fall of rupee that used to be at Rs 88.60 a US dollar in mid-July 2012.
The central bank could, however, neither revise the peg with the Indian Rupee nor can it be a mere spectator of the free fall as it is doing more harm to the economy than good.

Nepali Rupee that is pegged at Rs 1.60 with the Indian Rupee is cushioning the domestic economy – that is import based – in the long run, though it has hurt currently. Had the domestic economy been export-based, there could be chances of revising peg or unpegging Nepali Rupee like other currencies.  But the current structure of domestic economy does not give enough room for the Nepali Rupee to left floated.

The regular depreciation of the Nepali Rupee has, but, pushed the inflation up hitting the consumers hard.

The imports including petroleum products – the largest import of the country that stood at around Rs 108 billion in the last fiscal year – became expensive due to depreciation of Nepali Rupee vis-à-vis US dollar.

Though, the Reserve Bank of India is trying hard to arrest the free fall of the Indian currency, it has not been successful and the Indian Rupee is loosing ground further hurting the Nepali Rupee.

The free fall of Indian Rupee has created worldwide ‘panic selling’ of Indian currency further deteriorating its value, though the US dollar is getting stronger against all the Asian currencies.