The US dollar's surge continued on Wednesday as it appreciated by a further 65 paisa to set a new record against the rupee during intraday trading in the interbank market.

According to the Forex Association of Pakistan (FAP), the greenback was being traded at Rs177.50 in the interbank market at 12:25pm.

In the open market, the dollar's selling rate was reported at Rs178.50 and buying rate at Rs178 at the same time.

Well-informed analysts and brokerage houses are of the view that the dollar would soon touch the mark of Rs180, indicating that the decline in foreign exchange reserves coupled with high inflation would continue to devalue the purchasing power of the local currency.

The rupee has been losing value against the US dollar despite successful negotiations with the International Monetary Fund (IMF) and reports about the release of $3 billion from the Saudi Fund.

On Saturday, Adviser to the Prime Minister on Finance and Revenue Shaukat Tarin announced that the State Bank of Pakistan (SBP) had received the $3 billion deposit from Riyadh.

Pakistan has also announced plans to launch Sukuk bonds to raise an additional $1 billion.

Forex Association of Pakistan President Malik Bostan attributed the dollar's rising value to the consistent increase in importers' demand.

He said the pressure on the rupee could ease if the loan instalment was received from the IMF in January.

Exchange Companies Association of Pakistan General Secretary Zafar Paracha termed the dollar's rising demand "dangerous for the currency market".

He expressed hope that the greenback's supply would improve in the market with the issuance of the $1bn Sukuk bonds, following which the dollar's value against the rupee could decline.

“The rupee has been weak due to rising trade deficit as imports clocked in close to $8 billion for last month,” said Saad Hashemy, executive director at BMA Capital.

Government measures to control imports and the approval of IMF funding along with that from other avenues, such as the World Bank and Asian Development Bank, should help in providing strength to the Pakistan rupee in the near term, Hashemy added.

The demand for the greenback has remained high since the beginning of the current financial year. Since July, the US dollar appreciated by 12 per cent or Rs18.88 against the local currency.

The central bank reported on Thursday that the country's foreign exchange reserves fell by $244m to $16.010bn during the week that ended on Nov 26. The SBP did not offer any reason for the decline but experts believe it was due to debt repayment.

Additional input from Reuters