Rupee hits fresh 27- month low of 107.60 vs. US dollar

Kathmandu December 15- Nepali currency has been losing ground against the US dollar since the beginning of this week, as Indian rupee, with which local currency is pegged, is continuously coming under pressure.

Nepali rupee opened for trading at 107.17 against the US dollar on Sunday and fell to 107.32 Monday. On Tuesday, the rupee will hit a new 27-month low of 107.60 against the US dollar, shows the reference rate of Nepal Rastra Bank, the central bank.

The last time the rupee had fallen to this level was on September 5, 2013, when exchange rate stood at 107.83.

Nepali rupee’s rise and fall depends on the movement of Indian currency as it is pegged to Indian rupee 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 to purchase goods or services here while exchanging dollars.

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 three months of this fiscal — have continued to rise because of the nation’s status as ‘net importing country’.

This means a weak currency will only stoke inflation in a country like Nepal because importers will have to pay more of domestic currency while purchasing foreign goods priced in US dollars.