The rupee dramatically increased in the interbank market on Tuesday as it gained Rs10.55, or 3.83%, against the dollar, the State Bank of Pakistan said. The local currency closed at Rs275.44

The local unit also appreciated by Rs7 in the open market to reach Rs278 on Tuesday.

The sudden change in the value of the rupee as well as the bullish trend in the stock market is being attributed to positive sentiments in the market after Pakistan finally managed to sign a deal with the International Monetary Fund.

On Friday, the IMF reached a staff-level pact with Pakistan on a $3-billion stand-by agreement. The deal, subject to approval by the IMF board, comes after an eight-month delay and offers some respite to Pakistan, which is battling an acute balance of payments crisis and falling foreign exchange reserves.

Fahad Rauf, Head of Research at Ismail Iqbal Securities was of the view that the earlier decision of the international lender to suspend its support led to the fall of rupee.

“The standby agreement has come as a surprise, evident from moves in the stock market and Eurobond prices,” he told Reuters.

But he warned that the rupee’s hike might not last long because the currency would also come under pressure from the lender’s demands for Pakistan to ease curbs on imports.