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The Pakistani rupee surged by 5.4 percent to 120.84/122.45 per dollar on Monday, following domestic media reports over the weekend that China had agreed to provide $2 billion in loans.

A State Bank of Pakistan spokesman declined to comment on Monday about the media reports, which could not be confirmed.

Monday brought the first significant strengthening in years for the rupee, which had weakened more than 20 percent since December after four separate devaluations by the central bank.

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Karachi-based brokerage Intermarket Securities said weekend publication of full results of the July 25 election may have helped sentiment, as did media reports of possible inflows from Saudi Arabia.

Officials from Imran Khan’s Pakistan Tehreek-e-Insaf (PTI), or Pakistan Movement for Justice, party said they were in talks with independents and at least one other political party to form a coalition government.

But the rupee’s advance might be short-lived, given Pakistan’s economic problems, analysts said.

“Short-term flows aside, it is difficult to see the (rupee) sustaining its pullback for long,” Intermarket Securities said in a note.

Many analysts expect Pakistan to turn to the International Monetary Fund for a bailout, which is expected to be in excess of $10 billion, according to local media reports.

Fawad Khan, head of research at BMA Capital, said the rupee surge could also be due to steps by the interim government to curb imports and new rules on documentation for buying more than $500.

He agreed the election results added to optimism on lending and imports.

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“The market needs political stability, and that’s what it sees right now,” Khan said.

He added that the central bank so far had not acted to discourage the rupee’s rise, “but it might step in by tomorrow by start buying dollars from open market.”

The State Bank of Pakistan is the most influential player in the thinly-traded local foreign exchange market and controls what is widely considered a managed float system.

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