Pakistan's rupee gained 4.2% against the U.S. dollar at Wednesday's closing, central bank data showed, the largest single-day rise in years for a currency that has taken a battering in recent weeks on the back of an economic crisis.

The rupee closed at 228.80 to the dollar, up from 238.38 a day earlier, the central bank said, a day after the International Monetary Fund said Pakistan had cleared all prior actions needed to unlock much-needed bailout money.

“It is the highest appreciation of rupee in both absolute and percentage terms since 1999, according to central bank data,” Fahad Rauf, head of research at Ismail Iqbal Securities told Reuters.

On July 28, rupee fell to its lowest level against the dollar, closing at 239.94.

After two weeks of battering against the dollar, the rupee started to stage a recovery from Friday, gaining its value by 4.7% till Tuesday.

“Rupee recovering after lower-than-expected important economic numbers and IMF confirmation that all conditions have been met by Pakistan,” Mohammad Sohail, CEO at Topline Securities, told Reuters.

According to the latest numbers released by Pakistan Bureau of Statistics, Pakistan’s trade deficit was $2.6 billion in July, down 18% from a year ago and down 47% from June. Imports fell 13% from a year ago and 38% from June to $4.8 billion, the lowest level since December 2020.

On Tuesday, Pakistan got the green light from the IMF for the release of $1.1 billion of bailout funds after certain conditions were met.

The last condition was an increase in the petroleum development levy on July 31, the IMF's Esther Perez Ruiz told Reuters.

She said the meeting of the IMF board to release the bailout funds for Pakistan was tentatively planned for late August once adequate financing assurances were confirmed by Pakistan.

Reserves have dropped to dangerous levels of $8.5 billion, covering less than two months of imports. (Reporting by Syed Raza Hasan; Writing by Gibran Peshimam; Editing by Andrew Heavens and Bernadette Baum)