Thursday, 31st July 2014

Dollar rises to sell at Rs. 100 again


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The Nepali rupee has plummeted to a five-week low against the US dollar, with the selling exchange rate on Tuesday at Rs 100.  

The value of the dollar had been bordering above Rs 95 since last few months and had crossed Rs 100 on 4 December. Nepal Rastra Bank has set the selling rate at Rs 100 and buying at Rs 99.40.  

The Nepali rupee’s value is directly impacted by the value of the Indian currency. Despite the positive impact of the Indian elections, the Indian currency has been falling sharply due to persistent capital outflow from India. The surge in demand for dollars in India has lowered the INR value, and this has impacted directly on the NPR.

The obvious effect of the appreciation of the dollar is that our exports will benefit because our products become cheaper. By the same token, dollar-denominated imports will be more expensive. Theoretically, this should boost our exports. But since the basket of goods we export is relatively much smaller than our import volume, the balance is unlikely to shift in our benefit.  That many of our manufacturers depend on imported raw materials means that local products will also become more expensive.

The positive effect will be seen in the increased value of remittance sent home by migrant workers.