The Nepali rupee plunged to an all-time low of Rs125.16 against the dollar on Tuesday.

The Nepali currency weakened by 32 paisa a dollar in just a single day.

According to reports, the Nepali rupee’s fall is an effect of the steady depreciation of the Indian rupee with which it is pegged.

A strong US dollar has several advantages and disadvantages. It benefits some but negatively impacts others.

According to economists, the depreciation of the domestic currency could exert pressure on the balance of payments, especially at a time when the country is struggling to maintain it.

The depreciation of the domestic currency is likely to trigger the inflation rate, as the country is highly dependent on imported goods and has a very low level of domestic production.

According to Nepal Rastra Bank, the country’s export earnings amounted to Rs173.35 billion, while the imports bill amounted to a staggering Rs1.60 trillion in the first 10 months of the current fiscal year that ended in mid-May.

The most impact will be on the purchase of petroleum products on which Nepali is fully dependent. It will also impact the cost of chemical fertiliser which is flying through the roof.

The appreciation of the US dollar, on the other hand, can benefit the remittance earners.

As a result of the appreciation of the US dollar, remittance earnings, which had suffered a drop until the last nine months of the fiscal year, as compared to the same period last year, saw a growth in terms of Nepali currency.

Remittance inflows increased 0.2 percent to Rs811.79 billion in the review period compared to 19.2 percent in the same period of the previous year, according to the central bank’s statistics.

In the US dollar terms, remittance inflows, however, dropped 1.6 percent to 6.76 billion in the review period against an increase of 16.1 percent in the same period of the previous year.

A strengthening US dollar means tourists can buy more Nepali currency. Visitors from abroad will find the prices of goods and services in Nepal cheaper with a stronger dollar.

Nepali currency vis-à-vis the US dollar depreciated 3.71 percent in mid-May 2022 from mid-July 2021, according to Nepal Rastra Bank.