Money

Rupee hits 16-mth high

- Post Report, Kathmandu

Mar 16, 2017-

Nepali rupee has been gaining strength since the beginning of this week, buoyed by appreciation in the value of Indian currency with which Nepali rupee is pegged.

Nepali rupee will open for trading at a 16-month high of 105.34 a dollar on Thursday, up 84 paisa than on Wednesday, shows the foreign exchange reference rate fixed by the Nepal Rastra Bank (NRB). This rate is the highest since November 5, 2015 when each US dollar was traded at Rs105.20.

Nepali rupee has been climbing on the back of a stronger Indian currency. The Indian currency has been showing its strength since the political party led by Indian Prime Minister Narendra Modi scored a major victory in Uttar Pradesh.

“The victory was widely seen as a strong endorsement of PM Modi’s agenda,” Reuters said.

Indian rupee has remained the third-best performing currency in Asia so far this year after South Korean won and Taiwanese dollar.

On Wednesday, it opened at 65.76 a dollar, touched a high of 65.42 during the intraday trading, before closing at 65.69, according to LiveMint.

The Indian currency rose on Wednesday even as stock markets remained flat. The NSE index gained mere 0.08 percent and the BSE index closed 0.05 percent higher, as sentiment turned tepid ahead of the outcome of the US Federal Reserve’s meeting later in the day, according to Reuters.

“The Fed is almost universally expected to raise its benchmark interest rates, but investors are keen on seeing how much more tightening will happen this year.”

This sentiment is expected to encourage foreign investors to plough more funds into India. So far this month, foreign institutional investors have injected over IRs100 billion in Indian capital markets. Further investment will make Indian rupee even more stronger. This will automatically raise the value of Nepali rupee.

A stronger Nepali rupee is likely to reduce the country’s import bill, because Nepali traders will have to spend less while buying US dollars in which payments of foreign trade are made. This may ultimately reduce inflationary pressure because of Nepal’s growing reliance on imported goods.

A stronger currency, however, will not bode well for recipients of remittance here, as they will get less Nepali rupee while exchanging money sent by those working abroad. A stronger currency will also hit exporters, as foreigners will get less of local currency for each dollar they exchange to purchase goods and services in Nepal.

Published: 16-03-2017 09:36

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