The Nepali rupee plunged to a record low against the US dollar with Nepal Rastra Bank (NRB) fixing the exchange rate at 112.20 per dollar for Tuesday. The rupee’s free fall is an effect of the steady depreciation of the Indian rupee with which it is pegged.

According to the Indian media, the Indian rupee has slumped to an all-time low as emerging market currencies weakened amid concerns over the risk of contagion from Turkey’s financial market turmoil.

The Indian rupee ended at an all time low of 69.93 per dollar, down 1.56 percent, its steepest fall since September 3, 2013, from its previous close of 68.84, according to Livemint.com. Livemint quoted analysts as saying contagion worries from Turkey’s currency crisis are spilling over to the Asian space, as it’s manifesting through a stronger dollar.

NRB, the central bank, said it couldn’t take any measures to control the free fall of the Nepali rupee as the depreciation of the Indian currency against the US dollar was the main reason behind the decline. The free fall can’t be controlled even by maintaining a strong reserve of the US dollar, NRB Foreign Exchange Department Chief Bhisma Raj Dhungana said.

The depreciation of the domestic currency could further exert pressure on the balance of payments which suffered a deficit of Rs18.93 billion in the first 10 months of the fiscal year as shown by NRB statistics. In addition, it could raise market prices significantly as the country is highly dependent on imported goods for consumption.

Even though the fall in the value of the Nepali rupee vis-à-vis the greenback makes domestic products cheaper for foreign buyers, Nepal can hardly benefit from it as its export basket is too small compared to imports. The country shipped goods worth Rs66.65 billion while imports swelled to a staggering Rs985.83 billion as of the first 10 months of this fiscal year.

On the bright side, the appreciation of the dollar can attract more tourists to Nepal as it raises their purchasing power. Also, it can benefit remittance earners as the US dollars migrant workers send home will buy more Nepali rupees.