Rupee may touch 110 per dollar

KATHMANDU, Aug 28: Though Nepal Rastra Bank (NRB), the central bank, has fixed the exchange rate of the Nepali rupee at 105.35 against the US dollar for Wednesday and Thursday, the value of the rupee is expected to slump to a new low of around 110 against the greenback within a couple of days. Nepali commercial banks could not set a new exchange rate for the foreign currency due to the public holiday on the occasion of Krishna Janmasthami on Wednesday. NRB sets the foreign exchange rates on the basis of rates set by the commercial banks.



Reuters news agency has reported that the Indian rupee, to which the Nepali rupee is pegged, plunged to an all time low of 68.75 against the US dollar on Wednesday amid growing worries that foreign investors would continue to sell out of a country facing stiff economic challenges and a volatile global market. The value of the Nepali rupee will hit 110 against the dollar if the value of the Indian rupee set on Thursday against the dollar is converted at the fixed rate of 1.60. [break]



The news agency further said foreign investors sold almost $1 billion (645 million pounds sterling) worth of Indian shares in the eight sessions through Tuesday -- a worrisome prospect given that stocks had been India´s one sturdy source of capital inflow.



Persistent depreciation of the Nepali rupees against the US dollar has created fresh worries among policy makers and economists that the trade deficit would further widen amid the rising cost of imports.



The weakening rupee is also pushing up the import bill, which has consequently driven up the cost of production of domestic goods.



Though remittance receiving families and exporters have something to cheer about due to the stronger dollar, increasing flow of money from overseas and the rising cost of production are set to further jack up inflation, hitting the poor the hardest.

Related story

Nepali rupee hits new low against US dollar