Rupee tumbles to all-time low

Kathmandu January 21- Nepali rupee has tumbled to an all-time low against the US dollar a development which will benefit recipients of remittance income but will hit domestic consumers hard, as imported goods are likely to become expensive in the net-importing country.

Nepali rupee, which closed at 108.52 against the greenback on Wednesday, will lose 72 paisa by the time markets open on Thursday and trade at 109.24, shows the reference rate of Nepal Rastra Bank.

The last time the currency had hit a historic low was on September 4, 2013, when the value of rupee had slumped to 109.03 per dollar.

Nepali rupee has lately been losing ground, as Indian currency is taking a dip due to greater demand for greenback.

Nepali rupee automatically comes under pressure whenever Indian currency starts taking a beating, as Nepali rupee is pegged to Indian currency at 1.6.

A weak currency actually benefits recipients of remittance here, as they will get more Nepali currency while exchanging money sent by Nepalis working abroad.

A weak currency also provides leverage to exporters, as foreign buyers will get more of local currency when they exchange dollars to purchase goods or services here.

But this theory does not always apply in Nepal where prolonged hours of power cuts and other structural problems work as disincentives for exporters. Hence, weak currency has not been able to give a lift to Nepali exports.

While there is little improvement on exports front, imports  except in the first five months of this fiscal year  have continued to rise because of the nation’s status as ‘net importing country’.

A weak currency will only stoke inflation, as importers will have to pay more while purchasing foreign goods. Source: THT