The rupee continued to recover in the interbank market on Thursday, extending its gains against the dollar for the fifth consecutive session.

The local currency closed at Rs226.15, up Rs2.65 or 1.17 per cent, from yesterday’s close, according to the State Bank of Pakistan (SBP).

In the open market, the dollar was being traded at Rs221 around 4:35pm, according to data shared by the Forex Association of Pakistan (FAP).

A day earlier, the local currency jumped by Rs9.59 or 4.2 per cent in the interbank market — its largest single-day gain in years — to close at Rs228.80.

Fahad Rauf, head of research at Ismail Iqbal Securities, told Reuters that it was the highest rupee rally in both absolute and percentage terms since 1999, according to central bank data.

After two weeks of battering against the dollar, the rupee fell to its lowest level against the dollar on July 28, closing at 239.94. It then started to bounce back from Friday, rising by Rs11.5 till Wednesday.

General Secretary of Exchange Companies Association of Pakistan (Ecap), Zafar Paracha, said one of the reasons for the rupee’s recovery was the lower import bill for July, which was expected to reduce further in August.

“We will not have to import oil [in August] since we have stocks for around two months. The prices of edible oil, pulses, gas and coal have reduced internationally. Thus, the import bill has lowered and the pressure on the rupee has eased.”

Data released by the Pakistan Bureau of Statistics (PBS) on Tuesday showed the import bill dropped by 12.81pc to $4.86 billion in July from $5.57bn over the corresponding month of last year. On a month-on-month basis, the import bill dipped by 38.31pc.

Paracha also appreciated the State Bank of Pakistan’s (SBP) role in this regard. The central bank had been active for the last two to three days and had issued a joint statement with the Ministry of Finance on Sunday stating that there was no danger of default and the country’s financing needs would be more than fully met in the current fiscal year, he noted.

“This has also been helpful. The government authorities have also played a positive role.”

The Ecap secretary general, however, said the rupee was still undervalued and it needed to recover to Rs190 in the short term and Rs160 in the long term. “Nowhere in the region is the dollar as expensive as it is in Pakistan,” he said.

Komal Mansoor, head of research at Tresmark, said exporters had been selling dollars in the ready and forward markets since the International Monetary Fund’s (IMF) statement that Pakistan had completed the last prior action required for the review.

“The increased supply, coupled with limited outflows, has further strengthened the rupee,” she commented.