Rupee plunges Intervention not requested

Post Report

KATHMANDU, Oct 30 - Nepali rupee further plunged by over 30 paisa and was traded at Rs 74.40 for US Dollar when market reopened today after four days.

Nepali rupee had depreciated by 25 paisa for a dollar last Wednesday before market closed for the Tihar holidays.  

It is the speculative attack over Indian currency that shaved off a part of Nepali currency's value against the dollar. Since Nepali currency maintains a fixed exchange rate with Indian currency, any fluctuation in Indian currency is automatically transmitted to Nepali market unless there is a cross exchange rate among Nepali rupee, Indian rupee and dollar.

Though it is mainly the concern over rising oil prices and volatility in the international currency market (sliding Euro against dollar), Indian foreign currency market analysts say the month-end corporate demand for greenback is also having some impact on weakening rupee. Another factor fuelling the Indian Rupees (IRs) slide is Reserve Bank of India's new provision that enables Indians to gift up to US$ 5,000 to the relatives abroad, say analysts.            

"Since the Indian currency dipped down to as low as IRs 46.91 when market opened today, we adjusted the exchange rate of Nepali rupee against dollar at Rs 74.40 to avoid the cross rates," said Promod Rijal, President of Foreign Exchange Dealers' Association of Nepal (FEDAN).

However, since the Indian currency appreciated to IRs 46.62 for a dollar later on, Nepali currency didn't slide further during day trading, said Rijal.      

Despite depreciating rupee, commercial banks did not request Nepal Rastra Bank for intervention. "Since no commercial bank demanded for intervention,  FEDAN did not approach the central bank," said he.

The central bank had, however, floated over   5 million dollars Wednesday upon FEDAN's request to calm down the mounting demand for greenback.     

Nepali rupee has been witnessing a series of depreciation in the last few months. It has depreciated by over 29.16 percent since August 1997, when it started depreciating, after over one-and-half year of stability, under the impact of contagious South East Asian currency crisis. It underwent second round of depreciation in March 1998, after Indian currency succumbed to mounting international economic sanctions as a protest to India's nuclear tests on March 11, 1998.

NOC's cost declines marginally

Post Report

KATHMANDU, Oct 30 - Barely two weeks after Nepal Oil Corporation (NOC) raised the prices of petroleum products in the domestic market due to the soaring international oil prices, petro-prices in international markets have began easing.

Per ton international price of kerosene, as per the tenders received by NOC for its supply, came down from US $ 365.01 on October 18 to US $ 356.81 on October 25.

Presently, per litre costs of kerosene to NOC stands at Rs 25.80 while its selling price is Rs 26 in the open market. Per litre cost at the Haldia port, including the costs of freight, touches Rs 20.51.

Similarly, warfage cost is Rs 136 per ton, land cost is Rs 1.60 per ton, transportation costs from Haldia to Raxaul is Rs 1,240 per ton of kerosene and charges applied by Indian Oil Corporation (IOC) for transporting the oil is Rs 512 per ton.

In addition, customs duty levied on to kerosene is Rs 300 per kilolitre, local development tax Rs 260 per kilolitre and transportation costs from Raxaul to Kathmandu Rs 968 per kilolitre.

Moreover, demurrage, insurance, administrative cost and spills total to Rs 1,200 per kilolitre, while dealers' commission and depreciation per kilolitre stands at Rs 1,100.

The price of kerosene in the international markets at the time of petro-price hike at home on October 14 was US $ 380 per ton, which came to Rs 27.06 per litre to NOC for its delivery up to Kathmandu.

Similarly, the price of diesel was US $ 350 per ton. NOC had announced a hike in the price of diesel by 20 percent and petrol by 17.5 percent, in addition to raise in the price of kerosene by 100 percent.

Economy, finance and market

By Supa Upadhyay

Domestic Money Market

The Average Weighted Discount Rate of 91-day Treasury Bills (TBs) rose marginally by 5 basis points to 5.23 percent. The NRB had received 18 bids worth NPR 715 million against the notified amount of NPR 700 million. But NRB offered only NPR 445 million to the bidders while the remaining NPR 255 million was bought by secondary market. This indicated that the Public Debt Committee is willing to pay less for 91-day TBs. The rupee was traded higher at 98.74 and lower at 98.69. In the regular weekly auction, the NRB is going to issue 91-day TBs worth NPR 751 million on October 31, 2000.

Domestic Capital Market:

The stock market staged a moderate rate recovery largely on speculative purchases of selected  bank stock. The NEPSE index-100 opened higher at 547.38 from the previous week's close of 471.12 in the second day but it closed lower at 476.90 for the week. Trading was estimated at 63143 shares valued NPR 61.5 million in three working days of previous week. This week, the index of commercial banks, hotel sector, other sector and business sector improved while finance/insurance sector and production sector lost. This week brokers had quoted the prices of 42 companies on the trading board but only 32 companies were traded. Out of 32 traded companies, 14 companies improved, 10 companies lost and the rest 8 traded companies remained unchanged at their previous prices. Nepal Bank Ltd, NIC Bank and Taragaon Regency Hotels registered the first, second and third most traded companies,  trading 28475, 9770 and 3070 shares respectively. Shares of Nepal bank Ltd, Nabil Bank, Nepal Bangladesh Bank, Nepal Grindlays Bank, Himalayan Bank, Nepal SBI Bank, Nepal Indosuez Bank,   Bank of Kathmandu, NIC Bank, Taragaon Regency Hotels, NIDC Capital Markets, Premiere Insurance and Necon Air were able to trade in all three working days.

Forex Round-up:

Last week once more proved to be a bad week for the euro as it hit a new all time low of 0.8381 against the US dollar. The euro suffered despite some large falls in the US Equity Markets and the threat of further intervention lurking in the background. At present, the market seems to remain unconvinced that the US would cooperate with any further intervention.

The JPY has remained range bound recently but it is currently probing the top of the recent range as it hit two week low against the US dollar news that Japan's largest life insurer had failed. The INR slides marginally on dollar demand by state owned banks. The NPR also dipped by 25 paisas against the dollar over the week.