Customers pay as much as Rs 90.10 for a dollar
KATHMANDU, May 24:
Nepal witnessed a sudden shock of currency volatility on Wednesday,
as foreign exchange dealers sharply devalued rupee thrice on the day - a
record intervention.
This means customers buying US dollar at different intervals from the
same bank had to pay different (and higher) rates. It also rattled
importers, as significant jerk in the value of dollar eroded pricing
predictability.
“As a result, most of the importers refrained from making payments in
the afternoon,” said Pashupati Murarka, vice-president of Federation of
Nepalese Chambers of Commerce and Industry (FNCCI).
Following the consistent fall of Nepali rupee, which hit new lows
over the last couple of days, Nepal Rastra Bank (NRB), the monetary
authority, had set the exchange rate of dollar for Wednesday at Rs
88.23. But the rate at which Foreign Exchange Dealers Association of
Nepal (FEDAN) opened the trading remained far higher at Rs 89.35 at 11
a.m.
At 1:20 pm, the association reset the exchange rate of greenback at
Rs 89.70, citing rise in demand for dollars and sudden devaluation of
Indian currency, with which rupee is pegged, in the intra-day trading in
India. FEDAN again lowered the value of rupee at 3:50 p.m., making a
dollar cost Rs 89.90 in the Nepali market.
“We had to review the exchange rates because Indian currency touched
the psychological level of IRs 56 per dollar amid concerns of the euro
zone and India´s own vulnerabilities. The pressure was immense,” Bijay
Bahadur Shrestha, president of FEDAN told Republica.
As commercial banks deal at rates that vary over what FEDAN sets,
customers in the afternoon paid more than Rs 90 to get a dollar. “The
highest rate that customers paid for a dollar was Rs 90.10 at Nepal SBI
Bank,” said a source.
The bank, however, lowered the exchange rate to Rs 89.90 at the closing, according to a banker.
Prime Bank closed exchange at Rs 90.05 on the day, while Rastriya
Banijya Bank´s closing rate was Rs 90 per dollar. Other banks closed the
day´s trading at Rs 89.90 per dollar.
The average closing rate recorded on the day was 24 percent higher
over last year´s annual selling average. This means dollar´s rally has
already rendered Nepal´s imports expensive by a quarter over the last 10
months. As Nepal largely fulfills industrial raw materials, fuel and
daily consumable goods through import, it has affected industries and
general consumers alike.
“No wonder, even the Chinese goods that used to be regarded as
cheaper products have become expensive by over 20 percent in the
market,” said an NRB official.
The appreciation of dollar has also raised liability of debt
servicing, which needs to be serviced in convertible currency, for the
government, and exerted pressure to the Nepal Electricity Authority
(NEA) that pays electricity purchased from Bhotekoshi and Khimti on
dollar.
Rupee´s devaluation, however, benefited remittances receivers. It has
also enabled government enjoy gains in case of loans issued on US
dollar.
Source: Republica
