By Our Reporter 

 

Nepali currency plunged to a record low against US dollar on Tuesday as Nepal Rastra Bank (NRB) fixed the selling exchange rate at Rs. 124.25 per dollar.

 

Earlier on March 8, 2022, the US dollar appreciated at its highest level against the Nepali rupee at Rs. 123.44 per dollar. Then after, after the fluctuation, the exchange rate of a US dollar dropped to Rs. 120.88 on April 6, 2022.

The Nepali rupee which has continuously depreciated against the US dollar for the last few weeks set a new record on Tuesday.

 

Nepali currency has come under pressure owing to the devaluation of the Indian rupee with which it is pegged. The Nepali rupee has a fixed exchange rate of Rs. 160 for IRs. 100.

The national economy which has already been marred by the effect of the invasion of Ukraine by Russia is likely to suffer further from the weakening Nepali currencies.

 

The Ukraine war has already led to a rise in the prices of fuel and edible oil. Moreover, with the halt in the import of crude soybean and palm oils from Ukraine, Nepal’s export business has also been affected because these two items were two important exports of Nepal. 

 

Moreover, when the foreign reserve was facing pressure, the depreciation of the rupees will further the pressure because Nepal is an import-based economy and US dollars are required to pay the imported goods.

 

The depreciation would directly trigger inflation as the import cost of goods would be higher. 

Nepal will face an additional burden on the repayment of principal and interest of foreign debt due to the increasing exchange rate of the US dollar.