Why the dollar rate moves in Nepal: how NRB sets the exchange rate

Someone about to wire a semester's tuition abroad checked the dollar rate on Monday, got busy, and came back to it on Thursday. The rate had moved. Not a lot, a rupee or so, but on a transfer worth several lakh that rupee per dollar was real money. The obvious question followed: who decides this number, and why does it keep wandering when the Indian rupee rate on the same screen never budges?

The answer is one of the more elegant tricks in Nepali monetary policy, and once you see it the daily drift stops being mysterious.

One rate is bolted down, the rest float

Open NRB's daily foreign-exchange page and you see two kinds of entries. The Indian rupee is listed as a "Fixed Rate": 100 INR = Rs 160.00 buying, Rs 160.15 selling. It reads the same today, last month, and next year. Every other currency, the dollar, pound, euro, yen, riyal, dirham, carries a different number each day.

That split is the whole system. The current Rs 1.60 = Re 1 level was set in 1993, and the rupee has been anchored to the Indian rupee ever since. The peg itself, why it exists and what it costs you, is covered in depth in why the Nepali rupee is pegged to the Indian rupee. This post is about the other half: the currencies that move.

How the dollar rate is actually built

Because the rupee is fixed to the Indian rupee, NRB cannot independently pick a dollar rate. If it did, traders could buy dollars cheap on one side of the open border and sell dear on the other until the gap closed. So the dollar rate is derived, not chosen.

The mechanism, in one line: take the Indian rupee-to-dollar rate prevailing in the Indian market, then apply Nepal's fixed 1.60 peg.

Worked through:

• If 1 USD trades at about 83 Indian rupees, then 1 USD costs roughly 83 × 1.60 ≈ Rs 132.8 in Nepal.
• If the Indian rupee weakens to about 88 per dollar, 1 USD becomes roughly 88 × 1.60 ≈ Rs 140.8.
• By March 2026, with the Indian rupee near 93 per dollar, the Nepali rate pushed to about Rs 150 per dollar.

The Nepali rupee, in other words, is a passenger. It goes wherever the Indian rupee goes against the dollar, scaled up by a fixed 1.6. NRB then publishes the resulting buying and selling rates daily on its website, and those become the reference for the whole market.

Why it moves: you are really watching India

The reason your dollar rate changes from Monday to Thursday has almost nothing to do with anything happening in Kathmandu. It is the Indian rupee moving against the dollar, driven by Reserve Bank of India policy, India's trade and capital flows, and the broader strength of the dollar globally.

When the Kathmandu Post reported the rupee's record low of Rs 150.24 per dollar in March 2026, the explanation was explicit: the currency had depreciated "largely due to the weakening of the Indian rupee, to which Nepal's currency is pegged. Any fluctuation in the Indian currency directly affects the Nepali rupee under the fixed exchange rate system." That single-day drop was about Rs 1.72.

The trajectory tells the story. The rupee first crossed Rs 140 per dollar in early February 2025, having sat around Rs 133 a year before. Thirteen months later it had shed another ten rupees. None of that reflected a Nepali policy decision. It reflected a strong dollar and a softening Indian rupee, transmitted straight through the peg.

The NRB rate is not the rate you get

Here is where people lose a little money without noticing. The figure NRB publishes is a benchmark, not the price at the counter.

Banks, remittance companies and money changers set their own buying and selling rates around the NRB reference and add a margin. The selling rate (what you pay to buy dollars) is always a touch higher than the buying rate (what you get when you sell dollars); the gap between them is the institution's cut. NRB's own forex page concedes that open-market rates quoted by different banks may differ.

So three numbers exist for the same day:

1. NRB's reference rate, the headline you read in the news.
2. Your bank's selling rate, slightly worse, when you buy foreign currency or pay an overseas bill.
3. Your bank's buying rate, slightly worse the other way, when you convert inbound dollars to rupees.

Money changers are NRB-licensed and are required to display their daily rates at the place of business, so you can compare before you commit. For a small exchange the difference is loose change; on a tuition wire or a property-sized remittance, shopping the rate across two or three banks is worth the phone calls. The companion posts on paying foreign tuition the legal way and getting paid from abroad go into the channel-by-channel costs.

What holds the peg up

A fixed peg only survives if the central bank can actually supply dollars when importers and travellers demand them. That is what foreign-exchange reserves are for.

Nepal's reserves have been comfortable lately. Gross foreign-exchange reserves stood at over Rs 2.88 trillion in mid-September 2025, enough to cover roughly 16 months of imports of goods and services. The engine behind that cushion is remittance: money sent home by Nepalis working abroad is the largest single source of the dollars that keep the peg credible.

That dependence cuts both ways. As long as remittance flows and reserves stay healthy, the peg holds without strain. If reserves were to drain, defending Rs 1.60 = Re 1 would get expensive, which is part of why reserve numbers get watched so closely in the financial press.

Has the peg ever changed, and could it again

It has changed before. Nepal pegged at Rs 1.60 = Re 1 as far back as 1960, revalued after India devalued in 1966, ran a currency-basket arrangement through the 1970s and 1980s, then returned to the current Rs 1.60 level in 1993. So the peg is a policy choice, not a law of nature.

There is a live debate, through 2025 and 2026, about whether to revalue, widen, or loosen the link to the Indian rupee. The case for keeping it: stability and predictability with India, Nepal's biggest trade partner, and steadier value for trade and remittance. The case against: Nepal imports India's inflation and surrenders independent control of its exchange rate, effectively following the Reserve Bank of India's lead whether or not that suits domestic conditions. Most experts who have weighed in urge caution rather than a sudden float. For everyday planning, treat the peg as fixed and the dollar rate as something that will keep drifting with India.

A small practical footnote on Indian cash: Indian notes of Rs 100 and below circulate freely in Nepal, but NRB banned the Rs 200, Rs 500 and Rs 2,000 Indian notes in January 2019. Carry the smaller denominations if you are crossing the border.

What you actually need to know

Three takeaways:

1. The dollar rate is the Indian rupee rate in disguise. NRB fixes the rupee to the Indian rupee at 1.60 and lets the dollar float on top, so the USD figure is derived from India's market, not decided in Kathmandu. When you watch the dollar rate move, you are watching the Indian rupee move.
2. The published rate is a starting point, not the price. Banks and money changers add a margin and quote their own buying and selling rates. On anything large, compare two or three before you transact.
3. Reserves and remittance are what keep the number stable. The peg holds because dollars keep flowing in. That is the quiet machinery behind a rate most people only glance at.

If you are timing a large conversion, a tuition payment, a remittance, a foreign-currency purchase, and want a second pair of eyes on the rate math, email parjanya57@gmail.com.

This post is part of the Nepal Money Basics guide — the understand-your-money section.