(Bloomberg) -- Pakistan's rupee surged on optimism the International Monetary Fund's bailout will boost demand for the nation's assets.
The rupee advanced 4% to 274.5 per dollar on Tuesday, according to the foreign-exchange desk at Arif Habib Ltd. as the local market reopened after a four-day holiday. Pakistan dollar bonds due 2031 climbed for an 11th day on Tuesday, with the notes trading at 48 cents on the dollar. The benchmark stock index was little changed
Concern over a potential sovereign default eased after Pakistan struck a last-minute initial deal with the IMF for a $3 billion bailout last week. Stocks cheered the deal with the biggest gain in 15 years on Monday, while dollar bonds have surged. Barclays Plc upgraded its rating on Pakistan's dollar bonds to market weight.
“For Pakistan, the near-term default risk has substantially declined,” said Eng Tat Low, an emerging-market sovereign analyst at Columbia Threadneedle Investments in Singapore, “However, we remain cautious on a medium-term outlook.”
While the IMF's aid is boosting investor sentiment, there are worries over the government's ability to fulfill the conditions of the loan. Pakistan has had a tumultuous relationship with the IMF. The government also secured staff approval for a $1.1 billion loan in August, only to have the program halted due to Islamabad's failure to meet some conditions.
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