Nepali currency has slumped past Rs 100 against the US dollar to hit a new lifetime low.
Rupee, which was sold at Rs 98.95 per USD by Nepal Rastra Bank today, will plunge to an all-time low of Rs 100.60 by the time markets open tomorrow.
The slide comes as Indian rupee, with which Nepali rupee is pegged, plunged to Rs 62.50 today.
Indian rupee has been losing strength lately as foreign investors are taking away money from the country due to fears of economic slowdown.
International investors have withdrawn $11.58 billion in shares and debt from India's markets since the beginning of June, the BBC said quoting official data. If India fails to boost confidence of foreign investors, it may have to
raise funds from other sources or allow its currency to continue taking a freefall, experts said. Indian rupee’s troubles stem from a current account gap that is likely to hit $15 billion this year, The Financial Times quoted JP
Morgan as saying.
However, for countries like Nepal, which has a wide trade deficit, depreciation in currency, theoretically, should come as good news, as it boosts export competitiveness.
Nepal’s trade deficit widened to Rs 479.82 billion when last fiscal year ended on July 15 because of over-dependence on imports. Now with the slump, Nepal has an opportunity to mend this, as foreigners buying Nepali goods stand to get more of Nepali rupees for every dollar they exchange, making domestic goods cheaper for them.
Yet Nepal may not be able to use this opportunity. Since January, Nepali rupee has dipped around 14.5 per cent against USD. But between mid-December 2012 and mid-July 2013 Nepal’s exports fell to Rs 44.05 billion from Rs 44.20 billion in the same period the previous year.
Exporters failed to cash in on weak Nepali rupee because of prolonged power outage, labour disputes and other structural problems. As exports are falling, imports, on the other hand, are continuing to surge because the country has not been able to expand its industries and is bringing in everything from India and other countries. So, the latest depreciation will stoke inflation, as the country will have to pay more of domestic currency while purchasing foreign goods in US dollars.
Amid this, remittance receivers will be the only gainers as they will get more of Nepali currency while exchanging money sent by migrant workers.
Source: THT
Rupee, which was sold at Rs 98.95 per USD by Nepal Rastra Bank today, will plunge to an all-time low of Rs 100.60 by the time markets open tomorrow.
The slide comes as Indian rupee, with which Nepali rupee is pegged, plunged to Rs 62.50 today.
Indian rupee has been losing strength lately as foreign investors are taking away money from the country due to fears of economic slowdown.
International investors have withdrawn $11.58 billion in shares and debt from India's markets since the beginning of June, the BBC said quoting official data. If India fails to boost confidence of foreign investors, it may have to
raise funds from other sources or allow its currency to continue taking a freefall, experts said. Indian rupee’s troubles stem from a current account gap that is likely to hit $15 billion this year, The Financial Times quoted JP
Morgan as saying.
However, for countries like Nepal, which has a wide trade deficit, depreciation in currency, theoretically, should come as good news, as it boosts export competitiveness.
Nepal’s trade deficit widened to Rs 479.82 billion when last fiscal year ended on July 15 because of over-dependence on imports. Now with the slump, Nepal has an opportunity to mend this, as foreigners buying Nepali goods stand to get more of Nepali rupees for every dollar they exchange, making domestic goods cheaper for them.
Yet Nepal may not be able to use this opportunity. Since January, Nepali rupee has dipped around 14.5 per cent against USD. But between mid-December 2012 and mid-July 2013 Nepal’s exports fell to Rs 44.05 billion from Rs 44.20 billion in the same period the previous year.
Exporters failed to cash in on weak Nepali rupee because of prolonged power outage, labour disputes and other structural problems. As exports are falling, imports, on the other hand, are continuing to surge because the country has not been able to expand its industries and is bringing in everything from India and other countries. So, the latest depreciation will stoke inflation, as the country will have to pay more of domestic currency while purchasing foreign goods in US dollars.
Amid this, remittance receivers will be the only gainers as they will get more of Nepali currency while exchanging money sent by migrant workers.
Source: THT
