The Nepali rupee slumped to an all time low of Rs 100.60 against the US dollar on Monday as the Indian currency, to which the Nepali rupees is pegged, hit a fresh all-time low against the greenback.
Despite recent measures taken by the Indian government, the Indian rupee continued its losing streak against the dollar.
The Indian rupee fell as low as 62.49 against the dollar on Monday. The sharp fall in the value of the Indian rupee has prompted investors to siphon money out of India on the back of deepening worries about economic slowdown in Asia´s third largest economy.
In an earlier record low, Nepal Rastra Bank (NRB)–the central bank– had fixed the exchange rate with the dollar for Saturday and Sunday at Rs 99.02 per dollar. The Indian currency also plunged to an earlier record low of 62.03 against the dollar on Friday.
Economists said continued decline in the value of both the Nepali and India rupees will result in higher inflation and trade deficit, eventually constraining economic growth in the country.
“The ever-weakening rupee is all set to render more harm than good for our economy as it causes imports to become more expensive, leading to increasing production costs for domestic factories and higher inflation in the market,” Dr Bishwombher Pyakuryal, an economist, told Republica on Monday.
Though a stronger dollar drives up foreign currency reserves and remittance inflow volume, it does not support the economy significantly as most raw materials used in domestic industries are imported and more than 90 percent of remittance earning is spent on consumption.