Nepali rupee sinks further; hits 103.50 per dollar

Kathmandu, Aug 23 – The free-fall of Nepali currency against the US dollar does not seem to halt. The rupee posted a single-day fall of Rs 2.03 per dollar as the Nepal Rastra Bank (NRB) set the reference exchange rate at Rs 103.50 per dollar for Friday.
 

The domestic currency has been depreciating against the dollar for the last few months due to the weakening of Indian currency (IC), with which it is pegged.
 

 

According to the Indian media, the IC sank to an all-time low of 65.04 against the dollar on Thursday despite interventions from the Reserve Bank of India (RBI). The fall in the IC has been attributed to growing outflow of capital from the Indian economy.
 

 

Being an import-based economy, the rupee depreciation makes a huge impact on the economy. As more money should be spent for purchasing the dollar, goods imported from countries other than India have become expensive. Economists say a weak rupee will push up inflation that is already threatening to touch double digits.  Traders say prices have already started to rise. “Prices of imported essentials like pulses, packed food items and dried fruits have surged in the last few weeks,” said Shiva Hari Wagle, a retailer in Baluwatar, Kathmandu.
 

 

Rajesh Kaji Shrestha, president of Nepal-China Chambers of Commerce and Industry, said there would be a significant price rise if the rupee free fall continued. He said the prices have already risen by 25-30 percent.
 

The appreciation of the dollar also affects manufacturing industries that import raw materials from abroad. Increased manufacturing cost will eventually be passed on to consumers.
 

 

A banker said as a result of strong US dollar, the opening letters of credit (LC) has slowed, and importers have started per-determining the exchange rate for sending payment for goods to be imported. Ekantipur