The rupee, Asia's strongest currency against the dollar this year

“Cultural platitude is only one aspect of Nepal’s neighborly entanglements. More pervasive are economic domination and political influence of India. Landlocked Nepal has always remained a market for India. The shackles were somewhat loosened with Nepal’s joining of the Universal Postal Union in the 1950s, and currency autonomy achieved in the 1960s. However, the fact that today 25 percent of the Nepali market has Indian currency circulation indicates well the vulnerability of Nepal’s monetary situation.”- Dr Harka Gurung- march 2001)

Nepal does not have the direct peg adjustment relationship with Dollar but can instigate through Indian Currency .According to “The Economist”-weekly magazine published from London .Indian rupee has appreciated by nearly 10% since late 2006. Indian currency deparitated steady for almost a decade from 1993 to 2003 . Dropping from an average annual rate of Rs31.37:US$1 in the 1993/94 fiscal year (April-March) to Rs48.40:US$1 in 2002/03, The Appreciation of IC against the US dollar has also made NC stronger against dollar which is not natural.Nepal cannot sustain being pegged to the Indian currency anymore..it is a small country and does not have (and should not waste what it has) enough foreign reserve.