KARACHI, July 14: The rupee fell on Wednesday after a two-day rise as local banks stepped up dollar purchases to fund corporate payments for imports, dealers said. The dollar closed at Rs58.22, up from Rs58.19 on Tuesday.

"Corporate demand returned to the market and I wouldn't be surprised if the dollar rises further," said a dealer at a local bank. Demand for the greenback has remained high since April due to debt- and import-related payments.

Heavy selling was also witnessed in the bond market on Wednesday, where the benchmark 10-year bond yield rose to 8.10pc, up from a closing level of 7.93pc on Tuesday. The yield has been rising after June consumer price index data showed inflation rose 8.45 per cent year-on-year in June, the fastest pace in the fiscal year that ended last month.

A central bank ruling that will likely force banks to revalue their investments in the bond market also hurt sentiment. The monetary authority said on Wednesday it would implement a classification system for the banking sector's investments in government securities and corporate bonds, apparently in an effort to better regulate the risks faced by banks and domestic financial institutions.