Pakistani currency continued its uptrend for the fourth consecutive working day, gaining 0.77% (or Rs1.79) to close at a new two-week high at Rs232.12 against the US dollar in inter-bank market on Wednesday.
Meanwhile, Pakistan’s US dollar-denominated global bond prices fell while their yields rose the day Senator Ishaq Dar took oath as the new finance minister.
Pakistan’s business community emphasised the other day that they had confidence in Dar’s ability to steer the country out of financial crisis. However, it would be challenging for him to win the same high level of confidence from around the world.
“The rupee was artificially devalued (in the recent past),” the newly appointed finance minister said during his first brief interaction with the media on his return to Pakistan on Tuesday. “The rupee is undervalued,” he reiterated the stance on Wednesday.
With the latest recovery, the domestic currency has regained 3.16% (or Rs7.59) in the past four working days.
Earlier, it dropped around 12% (Rs25) in 15 working days to the low of Rs239.71.
The latest increase in the rupee’s value came after a decline in international crude oil prices. Crude hit a new nine-month low at $77 per barrel compared to $116 per barrel in June 2022.
It is expected that the reduction in oil prices will pave the way for a significant fall in Pakistan’s import bill.
Financial experts have linked the rupee’s ongoing recovery with the return of Dar after five years in self-exile. The minister is known for protecting the value of domestic currency.
Some experts, however, anticipate that the rupee’s recovery will remain short-lived considering the strengthening of the US dollar globally, low foreign exchange reserves of Pakistan and high foreign debt payments.
Reuters reported on Wednesday that Pakistan’s sovereign dollar-denominated bonds fell as much as 8 cents to hit fresh record lows after new finance minister vowed to bring down interest rates and fight inflation.
Shorter-dated issues suffered the biggest decline with the 2024 bond being bid at 40.2 cents on the dollar. Bonds due in 2025 and 2027 fell just over 4 cents while longer-dated maturities received bids at just over 36.6 cents in the dollar.
A local research house added that the yield of bonds maturing in December 2023 increased 1.81 percentage points to 96%. The yield of bonds maturing in 2024 spiked 1.65 percentage points
to 80% while it rose 613 basis points to 47% for the 2025 bonds.
Published in The Express Tribune, September 29th, 2022.
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