The upsurge of the rupee against the US dollar continued on Wednesday with the local currency gaining 49 paisa compared to the previous close on the back of $499 million inflows from the International Monetary Fund (IMF) and a Eurobond issue of $2.5 billion.

Tuesday’s closing rate was Rs153.09 while the dollar was being quoted at Rs152.60 during early trade at interbank today after having opened at Rs152.50.

Earlier today, the dollar hit a 22-month low of Rs151.50, last seen on June 11, 2019, before rebounding. The lowest trade reported so far today was at Rs151.75.

Asad Rizvi, former treasury head of Chase Manhattan bank, commented on the rupee's appreciation amid inflows from the IMF via his Twitter handle.

He said, "Keep in mind that we are heading for a choppy day. The market may take some time to stabilise. But this is quite normal behavior. In such a situation, institutions and corporate players should avoid speculation & book their transactions according to their needs."

Further, 10-day volatility increased from 2.02 per cent on March 1, to 4.1pc as of yesterday.

Yesterday, currency dealers in the interbank market said the dollar had lost 95 paisas and was traded at Rs153, closing at Rs153.09, close to the price available on June 13, 2019, at Rs152.90.

The falling dollar prices have initiated a new debate in the financial sector and among currency experts, who are questioning how long the appreciating local currency will sustain against the greenback.

The financial sector believes that the rupee is not gaining because of economic strength behind it but due to higher inflows of dollars and reduced demand for the currency in both the interbank and open market.

“The inflows — as approved by the IMF, the World Bank and the Asian Development Bank — have created a positive sentiment for the local currency which means the dollar would have to lose more in the coming weeks,” said Atif Ahmed, a currency dealer in the interbank market.

“These inflows are in the pipeline but are enough to influence the currency market sentiment and will keep the rupee on the higher side in the coming weeks,” he said.

Samiullah Tariq, head of research at Pak-Kuwait Investment Company, believes the dollar will further depreciate to Rs152.

Bankers, analysts and currency dealers said that along with higher inflows, the main reasons for depreciation of the US dollar against the rupee were the current account surplus and very low public consumption which kept the reserves high.

“We are selling over 90 per cent dollars of open market to banks since buyers are not available,” said Zafar Paracha, former general secretary of Exchange Companies Association of Pakistan.

He said the dollar was used by Pakistanis going for Umrah and travelling as well as paying for education and healthcare expenses.

“Pakistanis buy dollars for all the purposes I identified. Until the coronavirus pandemic is there, buying will remain at the lowest level,” he said.