Nepali rupee recorded back-to-back drop of over one percent and fell to a historic low against a US dollar on Tuesday after gloom reigned supreme in equity markets and oil importers and overseas investors bought more dollars in India, with which currency rupee is pegged.

Nepal Rastra Bank (NRB), the country´s monetary authority that adjusts the value of rupee depending on the movement of Indian currency vis-à-vis US dollar, set the price of the greenback at Rs 84.20 for Wednesday.

On Tuesday, rupee had fallen by 87 paisa to Rs 83.30 per dollar.

“Because our currency is pegged with the Indian currency, we can attribute the drop to turbulences in Indian market instead of ours,” said NRB Spokesperson Bhaskar Mani Gyawali.

Although he did not elaborate further, officials keeping track of currency markets attributed the drop to weakening of stock and sharp rise in demand for dollar by oil importers in India.

Rupee has been on a free fall in recent months mainly as dollar gained sharply against Indian currency. This has caused the cost of imports to jump, hurting consumers dearly.

Nepalis had braved inflation of 9.6 percent in the last fiscal year. Although the central bank officials said inflation was moderating of late, the latest trend of currency movement could disfigure it again.

“Particularly, it could cause non-food inflation to soar as we pay imports of non-food items in convertible currency,” said the NRB official.

Source: Republica