Bahraini dinar hits 17-year low

dubai — Bahrain’s dinar sank to a 17-year low against the US dollar on Tuesday as hedge funds dumped Bahraini bonds because of concern about the country’s rising public debt, regional bankers said.

The dinar dropped as low as 0.38261 to the dollar in the spot market. The bankers said they did not detect any concerted attack on the currency, but a plunge in Bahrain’s international bond prices in recent weeks had fuelled jitters in the foreign exchange market.

The central bank, which pegs the dinar at 0.37608 and sells dollars when needed to keep its currency close to that level, said in a brief statement that it was committed to the peg and had no plans to alter the Basis points jump in Bahrain’s 5-year credit default swaps dinar’s value. “The Central Bank of Bahrain is committed to keeping its currency pegged to the US dollar set at 0.37608 and has no plans to alter the Bahraini dinar’s value,” it said.

“The peg remains an important policy and provides an anchor for monetary policy which contributes to the stability of financial transactions and a positive impact on the overall economic and investment activities.” The dinar also weakened in the one-year forwards market on Tuesday to its lowest since September 2016, while bond prices slid further and the cost of insuring Bahraini sovereign debt against default hit a record high, implying more than a 30 per cent chance of a default in the next five years.

Bahrain’s five-year credit default swaps rose to 543 basis points (bps), according to data from IHS Markit, up seven bps from Monday’s close, its highest ever level. The country’s 2023 sovereign dollar bond fell 0.9 cents to a fresh record low of 87.44 cents.