Kathmandu, February 22
Nepali rupee has plunged below 110 mark against the US dollar after fluctuating within a band of 109.30 and 109.96 for the last 11 days.
The rupee, which closed at 109.84 against the greenback today, will lose eight paisa by the time the market opens on Tuesday, to trade at another historic low of 110.04, shows the reference rate of Nepal Rastra Bank.
With this loss, Nepali rupee has shed over seven per cent in value since the beginning of this fiscal year on July 17.
Nepali currency has lately been taking a beating as Indian rupee has continued to weaken.
Nepali rupee takes a dip whenever Indian currency weakens because Nepali rupee is pegged with the Indian currency at 1.6.
Today, Indian currency fell to as low as 68.69 against the US dollar during the intra-day trading, before closing at 68.60 — the lowest since August 28, 2013.
Indian rupee fell to a fresh 30-month low, as market mood remained jittery ahead of the Union budget scheduled for February 29, LiveMint reported.
Indian currency is currently under pressure, as foreign institutional investors are dumping Indian assets.
Since the beginning of this year, overseas investors have sold $2.47 billion more local shares than they bought this year.
Indian central bank Governor Raghuram Rajan, however, does not seem worried by erosion in value of Indian rupee.
Earlier, he said ‘a certain amount of depreciation is necessary’ until consumer prices come down.
Certain amount of depreciation in the value of Indian rupee is also expected to benefit exporters in India.
“A gradual depreciation in Indian rupee is likely to be beneficial to domestic manufacturers exporting goods in the highly competitive global market,” Anindya Banerjee, currency analyst at Kotak Securities, was quoted as saying by The Economic Times.
With rising steel prices domestic manufacturers, who use steel to export finished goods, have already approached the government only to insist on a weaker Indian rupee, sources familiar with the matter told The Economic Times.
But depreciation in Indian rupee, which has lowered the value of Nepali currency, is not expected to benefit exporters in Nepal, who have to deal with prolonged hours of power cuts and other structural problems, which erode export competitiveness.
A weak currency, therefore, has never been able to significantly raise exports from the country.
Instead, weak currency is likely to build inflationary pressure here, because it will make imports expensive in ‘net importing’ country.
However, weak currency will benefit recipients of remittance here, as they will get more Nepali currency while exchanging money sent by Nepalis working abroad.
A version of this article appears in print on February 22, 2016 of The Himalayan Times.