hey sajha people, i am very much eager to know the cause for downfall of dollar rate with respect Nepali currency. a year ago it was 74 and few months back it was 72 now its 68 rupees per dollar. do you see any possibility for good valuation of dollar in nepali forex in next few days. thanks

Thank India's burgeoning economy for that. We're still pegged at 1.6 and I'm wondering just how long will our economy be able to sustain it as our economy in all financial sense, sucks BIG time (we're headed for a financial panic ala 2002 in Argentina when they had to let go of their peg against the USD...overnight people's nominal weath decreased by half and by 60% within a week). Once when that scenario takes place, Sajhakohero, in your own words, you will see a "good valuation of dollar in nepali forex"

Forex market dealers said the main cause for appreciation was commercial banks selling American dollars to earn rupees. The Indian currency is quite short in supply following the Reserve Bank of India’s squeeze on liquidity. The banks need rupees to met their statutory needs. Even the inter-bank call money market rates about 10 days ago had surged to 80 per cent.

The RBI is still keeping off the forex market and is likely to do so despite the rupee strengthening vis-à-vis the dollar because its priorities are to control inflation and stop credit expansion.

Is it a good time to buy Indian Currency?

If you have money sitting doing nothing, you should either invest it or store it in some foreign currency I think. Nepali economy isn't reliable. But I would rather you invest it in Nepal, as it helps the Nepali economy. Also buying land and stuff helps as well.

At the rate of things happening in Nepal, moving all your assets from NPR to INR would definitely be the best bet. Unless, miraculously political stability, no more strikes, no more extortions on businesses, free movement of basic necessities into Ktm from India, etc. happens overnight. As any FX trader will tell you, any negative sentiment on a currency will cause its devaluation and the only reason NPR has not suffered is because of its peg to the INR. This will ultimately change within a certain time frame (could be tomorrow, could be next month or 5 years down the road).

- Pls do your own research too as the above is only my suggestion and not a guarantee.

Samsara ,Thanks for your analytical thought.

But it's true that any expectation of currency devaluation can have serious repercussions in the economy. So I guess it is better if the people aren't aware of it, because if they are, and start following your suggestion, it will have a negative impact on the economy as there will be less Nepali money in circulation. Bandhas and strikes seriously need to stop. Those ignorant people have no idea how their acts can bring down the entire country. Kathmandu's love for spending has also saved the economy from crashing I guess.

bored, your line should've read: Kathmandu's love for spending with the foreign reserves sent by Nepalis working abroad is the only saviour to the NPRs downfall. My viewpoint is that the only reason most people send money back is that they plan to return back to Nepal one day when they feel they've toiled enough and live off that money. What if realization sets in and all these migrant workers decide to remain in the countries they're in because of the political instability, extortions, etc. and retain most of the money in their host countries to better their lives there?

Nepal's financial gains from tourism aren't the way it used to be (may take years for it to come back...but do we have time?), our industries and agricutural sectors are so behind the cheaper and more efficient competition from India that exporting Nepali goods is a joke in itself and our monetary policy changes will hardly attract any foreign investments thanks to the costs being higher than the benefits reaped because of the political instability and poor infrastructure inherent within our system...Where now do we get our foreign reserves if all the above fails and our Nepali expatriates decide to stop sending money back home? With no demand for the NPR, isn't it then doomed to a free-falling asteroid? I'm still wondering how after all these years we were still able to maintain the peg at 1.6 with India. Sooner or later, this is bound to give in.

You're right that any expectation of currency devaluation can have serious repercussions in the economy...But, isn't it nicer to know things a lil earlier rather than wait for the shark feeding frenzy to take place and be left out with nothing int eh end? Also, there would be more money in circulation (not less as you pointed) as the demand would fall dramatically and the scenario would be reminiscent of Nazi Germany after WW1 when a cart full of money got you a loaf of bread! That, my friend is too dramatic...But what I'm trying to say is that, at the current rate of the situation in Nepal, the NPR is bound to crash anytime and it'd help to be a lil aware than totally ignorant...

That's true. Thanks for your insight. I just hope the Nepalese economy can hold on for a while until this political situation gets some sort of direction. Perhaps then we can start inching our way back out of this mess.

I know my friend...am hoping for a silver lining too. I'd hate for my family and friends to go down with the mess made by someone else: the maoists in collaboration with our political leaders.

Nepal's Economy Under remittance security blanket:

If Adam Smith were to be alive today. Even he would be shocked with the present economic scenario of Kathmandu's Economy.

The cash liquidity is so high (mainly due to remittances) that the economy is crash proof for at least 10+ years. When the global migration laws change and the remittance pipe dries out then we are headed for trouble. So the strategic move now is to make a transition to a formal economy and create environment for SME businesses.

When growing up I heard this saying "Garib Desh ko Dhani Raja" now the saying is more like "Garib desh ko Dhani janata"

Major portion of our economy operates within informal sector so it will be very tough to have a very clear picture of our economy.

In the mean time economy has found its engine to keep things going.

Cant comment much about the devaluation coz I am not pretty ignorant about the marco economic relations that determines the rate. My personal hunch is I think we are better off having our currency pegged to India as their economy is in upward trend.

in the mean time check this link out

http://www.timesofmoney.com/remittance/jsp/rmt_NEWS.jsp

They are predicting RS to gain more than 2 RS..

bholi parsika ecomomic mantri haru.............kam chaina kajj chaina sajhama hero bannu pareko herna iniharulai........!! ..........paisa paisa khali paisa........aru kehi kura chaina dimagma....how about sex??

bored wrote above that devaluation would be bad. Could you please explain your statement?
Straight forward macro economic analysis tells me that Currency devaluation is good for exports and will tend to increase real GDP. Of course, the practicality of it, I cannot say anything about. By that I mean the time frame that this would apply for is not certain.

And a pegged exchange rate like we have with Indian Rupee has definitely helped Nepal from geting too much inflation since it provides a higher degree of price discipline. A flexible ER would be too unstable in terms of inflation.

Samsara, can you please enlighten me as to how Nepal is on the verge of getting hyper inflation like war-time Germany? From my knowledge, I believe Germany simply produced money to pay off all their debts which produced hyper inflation. Unless Nepal did that, I can't see how else hyper inflation would occur in Nepal.

Dollor downfall really sucks!

ktmValleyBoy, seems that you're a novice in economic anlysis. Currency devaluation is good for exports but is partly responsible for inflation and in the case of a peg being removed (ala ARS against the USD back in Jan 2002) the inflation could shoot up 50 - 70% overnight. And real GDP will "go down" as in the case of Argentina, my friend!

Why do you think the ARS peg on the USD fall through? The major reason was the defference and the imbalance of the 2 economies. The US had just coming off the dot com boom, had a half trillion+ trade surplus, had major foreign direct investments coming through and US exports (mainly defense) was still vehemently chugging along. No wonder, the demand for the USD as always, looked strong (healthy economic data too helped here). In comparison the stagnant Argentinian economy defaulted on its intl debt and didn't have show any sings of coming back for years down the road. The Banco Central de la Republica Argentina took all measure to maintain the peg but how long do you think one's Reserve Bank can keep buying their own currency to keep its demand stable? A time comes about when that would be too expensive to continue and the market forces would ultimately prevail (ala Thailand in 1997: 20% crash in a few days, Malaysia, Indonesia and Phillipines 1997...the famous fatwa against George Soros was released then). As I've noticed, pegs are meant to be broken (even China did it in 2005) and the INR/NPR is no different.

Agreed a pegged currrecy does give us stability but there are huge costs associated with this. At the current rate of Nepal's developement (or negative development) compared with India's booming economiy there is no way we would be able to sustain it for a long period of time if the current scenario keeps going on for years (it has already). A financial panic is inevitable unless Nepal changes overnight miraculously. Prepare for the worst is all that I'm saying.

And, the example of Germany was just that...an example (Pls see the very next line when I said "That, my friend is too dramatic")!! As in my first post, an ARS situation looks more likely for the NPR.

Samsara, good analysis

Can anybody predict what will next to NRs. It will more down 65~60 or come up? Sure it depends on IRs. Even any good/bad symptom?

$1= NRs 67.11 Tuesday. Most Probably it will be $ 1 = NRs 66.32 Wednesday

Any thougt in future of dollar VS RS?