KATHMANDU, NEPAL
The Nepali rupee plunged to another record low on Wednesday with the central bank fixing the exchange rate at Rs 94.25 per US dollar for Thursday. The Nepali rupee’s freefall is an effect of the steady depreciation of the Indian rupee with which it is pegged.
According to the Indian media, the rupee began going downhill after foreign investors in India, concerned by bleak growth prospects, switched to the greenback.
Meanwhile, spokesman of Nepal Rastra Bank (NRB) Bhaskar Mani Gnawali said the sharp drop of the Nepali rupee could be the result of demand for the dollar outstripping supply in the Indian market. “Indian companies which have to make payments on a huge scale have pushed up demand for the US dollar in the Indian market,” he said.
However, Gnawali said that the fast rise of the US dollar was a temporary phenomenon. “The exchange market will be fairly stable in the long run through demand and supply mechanism,” he added.
A depreciation of the US dollar would raise the cost of debt servicing and third country imports for Nepal. As the country is heavily dependent on imports, this will give rise to inflation. Regarding the beneficial aspect, exports of domestic goods will go up as they will become cheaper in the international market. Similarly, the value of the remittance sent home by Nepali migrant workers will increase in rupee terms.
Meanwhile, banks have said that the number of letters of credit being opened for imports has come down while remittance inflow has soared in recent days. Traders said they were in a wait and see mode with regard to placing import orders for goods from third countries.
Despite the fall in the value of the Nepali rupee vis-à-vis the greenback making domestic products cheaper for foreign buyers, there has been no increase in exports as Nepal’s export basket is too small. The country shipped goods worth Rs 63 billion while imports swelled to a staggering Rs 458 billion as of the first eight months of this fiscal year.
Source: ekantipur, 20th June 2013
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The Nepali rupee plunged to another record low on Wednesday with the central bank fixing the exchange rate at Rs 94.25 per US dollar for Thursday. The Nepali rupee’s freefall is an effect of the steady depreciation of the Indian rupee with which it is pegged.
According to the Indian media, the rupee began going downhill after foreign investors in India, concerned by bleak growth prospects, switched to the greenback.
Meanwhile, spokesman of Nepal Rastra Bank (NRB) Bhaskar Mani Gnawali said the sharp drop of the Nepali rupee could be the result of demand for the dollar outstripping supply in the Indian market. “Indian companies which have to make payments on a huge scale have pushed up demand for the US dollar in the Indian market,” he said.
However, Gnawali said that the fast rise of the US dollar was a temporary phenomenon. “The exchange market will be fairly stable in the long run through demand and supply mechanism,” he added.
A depreciation of the US dollar would raise the cost of debt servicing and third country imports for Nepal. As the country is heavily dependent on imports, this will give rise to inflation. Regarding the beneficial aspect, exports of domestic goods will go up as they will become cheaper in the international market. Similarly, the value of the remittance sent home by Nepali migrant workers will increase in rupee terms.
Meanwhile, banks have said that the number of letters of credit being opened for imports has come down while remittance inflow has soared in recent days. Traders said they were in a wait and see mode with regard to placing import orders for goods from third countries.
Despite the fall in the value of the Nepali rupee vis-à-vis the greenback making domestic products cheaper for foreign buyers, there has been no increase in exports as Nepal’s export basket is too small. The country shipped goods worth Rs 63 billion while imports swelled to a staggering Rs 458 billion as of the first eight months of this fiscal year.
Source: ekantipur, 20th June 2013
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Gold Price reaches Rs.52,350 per tola due to appreciating US Dollar
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