The Nepal Rastra Bank (NRB), the central bank of Nepal, has announced the foreign exchange rates for Wednesday, October 30, 2024, highlighting the US dollar’s strong position against the Nepalese rupee (NPR). According to the latest update from the central bank, the buying rate for one US dollar is set at NPR 134.23, while the selling rate is NPR 134.83.
Throughout October, the US dollar has shown notable strength against the Nepalese rupee, consistently trading above the NPR 134 mark. This trend reflects the dollar’s broader performance in the global currency market, where it has demonstrated resilience and appreciation against many emerging market currencies.
The strong dollar has mixed implications for Nepal’s economy. The higher exchange rate makes imports more expensive, potentially contributing to inflationary pressures in Nepal. However, Nepalese working abroad may find their remittances yield more rupees, benefiting recipient families.
Foreign tourists might find Nepal a more attractive destination due to increased purchasing power, some experts suggest. While short-term fluctuations are common in currency markets, the overall trend suggests a continuing strong position for the US dollar against the Nepalese rupee.
Nepal maintains a fixed exchange rate with the Indian rupee (INR) through a currency peg system. Currently, the Nepalese rupee (NPR) is pegged at NPR 1.60 = INR 1 for buying and NPR 1.6015 = INR 1 for selling. This system, in place since 1994, replaced earlier fluctuating rates.
The peg ties the NPR’s value directly to the INR, causing it to move in tandem with the INR against other global currencies. This fixed rate is maintained due to Nepal’s close economic ties with India, its largest trading partner and primary source of foreign investment. The peg stabilizes the exchange rate, reducing currency risk for cross-border transactions.
The NPR’s value against the U.S. dollar and other major currencies is indirectly influenced by the INR’s exchange rate with the dollar. When the INR depreciates against the dollar, the NPR also weakens, making imports from dollar-dominant economies more expensive and potentially leading to inflation in Nepal. Conversely, if the INR strengthens, the NPR appreciates, making imports cheaper.
However, this peg limits Nepal’s ability to manage its currency independently, as any volatility in the INR-USD exchange rate impacts the NPR-USD rate. While it offers stability in trade with India, it poses challenges in maintaining balanced trade with other countries. The Nepal Rastra Bank, Nepal’s central bank, upholds this peg by buying and selling Indian rupees to keep the rate steady. Thus, the NPR is indirectly influenced by India’s economic conditions and monetary policy.
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Susan Shrestha
View More PostsSusan Shrestha is a Europe-based journalist. He covers a wide range of topics, from local matters to global affairs. Shrestha previously worked as a reporter for Khasokhas in Nepal.
