Money

Rupee surges to nearly 17-mth high

  • This rate is the highest since November 2, 2015 when each US dollar was traded at Rs104.52
- Post Report, Kathmandu

Mar 21, 2017- Rupee’s surge seems unabated for now, as the Indian currency, with which Nepali rupee is pegged, has continued to gain weight due to hike in flow of foreign investment.

Nepali rupee will open for trading at almost 17-month high of 104.94 a dollar on Tuesday, up 10 paisa than on Monday, shows the foreign exchange reference rate fixed by the Nepal Rastra Bank (NRB). This rate is the highest since November 2, 2015 when each US dollar was traded at Rs104.52.

The value of Nepali rupee fluctuates depending on the movement of the Indian rupee, because Nepali currency is pegged with Indian rupee at 1.6.

On Monday, Indian rupee opened at 65.39 a dollar and touched a high and low of 65.31 and 65.47, respectively, before closing at 65.36--a level last seen on October 30, 2015, according to LiveMint.

The Indian rupee further gained strength on Monday, as foreign investors continued to buy local shares and debt instruments, LiveMint said.

So far this year, foreign institutional investors have bought $3.98 billion and $1.23 billion worth of Indian shares and debt instruments, respectively. The Indian rupee has been becoming expensive since the major victory of the political party led by Indian Prime Minister Narendra Modi in Uttar Pradesh. Indian rupee has gained about 2 percent since then.

Indian central bank Governor Urjit Patel, according to Bloomberg, had said last month that the currency is broadly where it should be and that the Reserve Bank of India (RBI) intervenes only to curb volatility.

However, chances of Indian currency losing its strength are possible as the Indian government is likely to absorb excess capital flowing into the country from abroad to give a boost to its foreign exchange reserve.

India will attract $55 billion in capital flows in the year through March 2018, part of which the RBI will mop up to boost foreign-exchange reserves by $20 billion, Deutsche Bank AG has said.

The intervention, according to the bank, will weaken the Indian rupee to 67.5 per dollar by the end of December from 65.4 per dollar on Monday.

“We expect the RBI to continue managing volatility,” Kaushik Das, economist at Deutsche Bank, wrote in the report.

A stronger Nepali rupee tends to reduce the country’s import bill, because Nepali traders will have to spend less while buying US dollars--a currency 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 benefit 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: 21-03-2017 10:51

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