KARACHI, Pakistan - Pakistan's currency market bounced back on Wednesday to gain 1 rupee against the U.S. dollar in intra-day trading after long-time ally Saudi Arabia announced a support package of $4.2 billion, traders and bankers said.
The Saudi money will help Pakistan to shore up its foreign reserves, which has been shrinking.
The rupee closed the previous session at 175.60 against the dollar. It had depreciated around 13.6% since May.
"Rupee appreciation is result of the Saudi funding announcement, widely seen as a positive surprise much needed to bolster the external account," Saad Hashemy, executive director at BMA Capital, told Reuters.
Saudi Arabia announced on Tuesday $3 billion to support Pakistan's foreign reserves, as well as extending financing of the oil derivatives trade for a total of $1.2 billion during the year, Pakistan's Information Minister Fawad Chaudhry said.
Pakistan has been in talks with the International Monetary Fund (IMF) for the last two weeks to secure a $1 billion tranche, but its sixth review remained inconclusive.
Pakistan's Prime Minister Imran Khan thanked Saudi Arabia.
"The Kingdom of Saudi Arabia has always been there for Pakistan in our difficult times, including now when the world confronts rising commodity prices," Imran Khan said in a tweet.
In 2018, Saudi Arabia gave $3 billion in foreign currency support and further loan worth up to $3 billion in deferred payments for oil imports.
(Reporting by Syed Raza Hassan; editing by Barbara Lewis) ((firstname.lastname@example.org;))