US Dollar Hits Record High, Nepali Rupee Slips to Historic Low

Kathmandu — The Nepali rupee has fallen to its weakest level in history as the US dollar surged to a record high. According to Nepal Rastra Bank, the exchange rate on Tuesday was fixed at Rs 144.88 per US dollar for buying and Rs 145.48 for selling, marking the lowest point ever for the domestic currency.

The sharp depreciation of the Nepali rupee is largely attributed to its fixed exchange rate arrangement with the Indian rupee. As the Indian currency weakens against the US dollar, the Nepali rupee is automatically affected. In recent weeks, the strengthening of the dollar in the global market has intensified pressure on the Nepali currency as well.

How is the exchange rate determined?

Nepal maintains a fixed exchange rate regime with India, pegging the Nepali rupee at 1.60 per Indian rupee. However, exchange rates with other foreign currencies are determined based on the Indian rupee’s performance. As a result, when the Indian rupee depreciates against the US dollar, the Nepali rupee also weakens correspondingly.

Economists point out that fluctuations in the Nepali currency are influenced more by the Indian rupee and India’s economic conditions than by Nepal’s own demand-and-supply dynamics. This structural dependency makes the Nepali rupee highly sensitive to developments in the Indian economy.

Why is the Indian rupee weakening against the dollar?

The Indian rupee has been under sustained pressure against the US dollar due to multiple factors. A strong dollar, rising capital outflows, widening trade deficits, and heavy dependence on imports are cited as key reasons behind the depreciation.

The US Federal Reserve’s tight monetary stance has strengthened the dollar globally, prompting investors to move toward safer assets. This has led to increased outflows of foreign institutional investment from India, further weakening the rupee. Additionally, India’s high dependence on imports such as oil, gold, and electronics has widened the trade deficit, increasing demand for dollars and putting further pressure on the currency.

Uncertainty surrounding global economic conditions and trade relations between major economies has also contributed to volatility in the foreign exchange market.

Why is the dollar strengthening?

Global economic uncertainty, ongoing conflicts, and geopolitical tensions have driven investors toward the US dollar as a safe-haven currency. Signals from the US Federal Reserve that interest rates may remain higher for a prolonged period have further boosted demand for the dollar.

At the same time, developing economies face strong dollar demand for import payments, foreign debt servicing, and energy purchases. With limited supply and sustained global demand, the dollar’s value has continued to rise.

Impact of a stronger dollar on Nepal’s economy

A rising dollar has both positive and negative implications for Nepal’s economy. On the positive side, remittance inflows, tourism earnings, and export revenues increase in rupee terms. Higher remittance receipts from Nepalis working abroad could help strengthen foreign exchange reserves.

However, the negative effects appear more pronounced. As an import-dependent economy, Nepal faces higher costs for petroleum products, medicines, machinery, and essential goods, increasing inflationary pressure. Rising fuel prices also raise transportation, logistics, and industrial production costs.

Although economic theory suggests that a stronger dollar should reduce imports, Nepal’s imports largely consist of essential goods, making them difficult to curb. As a result, higher import bills could further widen the trade deficit instead of narrowing it.

Moreover, external debt denominated in US dollars becomes more expensive, placing pressure on debt servicing and the balance of payments. Efforts to control inflation through tighter monetary policy could push interest rates higher, slowing private-sector investment and overall economic activity.

Economists note that while a strong dollar may offer short-term relief through higher remittance and export earnings, Nepal’s heavy import dependence, weak domestic production base, and persistent trade deficit make the situation challenging. Without strengthening economic fundamentals, Nepal may struggle to fully benefit from a strong dollar, they warn.