Market of Foreign exchange in Nepal

Trading of one country's money for another country is the foreign exchange market. This market is trading by a number of large banks. A million dollar trade worth is small for this foreign exchange market, but it is the prices of these transaction affect the exchange rates.
In Nepal there is excess of import rather than export. When we demand the things from abroad we change our money with the goods or we pay the amount for the goods. We use Nepali money to buy the currency of that country and that currency is used to buy the goods. In this way we deal with the foreign exchange market.
The exchange rate or the price of foreign money is very important price when we buy things that are made on another country. There are two things which affect the exchange rate mostly. One is the price of the things in the native country and other is dollar price of that currency.
If the market determines the price of foreign currency it will adopt a system of floating exchange rate. In the developing countries government fix the exchange rate and domestic currency can not be freely converted into the foreign money. Shortage of foreign money occurs if the government sets the foreign exchange below the market price.It prevents the market from increase in price to eliminate shortage by outlawing private transactions in foreign exchange. The citizens who get foreign exchange has to sell it to the government .Government is the only legal source of foreign money in the developing countries.
If the foreign exchange is above the market- clearing price there may occur shortage of domestic currency. The government can prevent the shortage from raising price by selling foreign exchange into the market.