In line with expectations, the currency gained 2.2% to close at Rs125.04 against the US dollar in the inter-bank market on Monday, following reports that China had agreed to immediately lend $2 billion to Pakistan.The currency gained as much as 5.4% in intra-day trading, appreciating to Rs121 against the dollar at one point.State Bank of Pakistan (SBP) spokesman Abid Qamar confirmed the rupee gained strength in the inter-bank market. "The rupee has traded at a variety of rates. We don't report fluctuations.”The rupee, however, edged lower at the end of trading, closing with a gain of 2.2%, according to the central bank.The Express Tribune had reported on Saturday that China agreed to lend $2 billion to help Pakistan that faces a looming balance of payments crisis as foreign currency reserves fall to alarming levels.The development gave fresh impetus to the Pakistani rupee that had shed close to 22% against the dollar since December 2017.On Monday, the currency appreciated to Rs121 in intra-day trading, market sources said, adding that the country is expected to see further inflows in the coming months, which would give further strength to the rupee. Rupee closed at 127.86 against the dollar on Friday.The currency has been on a downward spiral for the past several months, as a widening current account deficit takes toll on foreign exchange reserves.Pakistan booked a record high current account deficit of $17.99 billion in fiscal year 2018, a gap that eroded reserves to $9 billion, a four-year low, according to the SBP.However, with reports pouring in about the country receiving dollar inflows and is also likely to go into talks with the International Monetary Fund (IMF) as the Pakistan Tehreek-e-Insaf (PTI) forms the new government, the rupee has gotten a lifeline.“Pakistan is likely to receive around $7 billion in (fresh) foreign loans from financial institutions and friendly countries,” National Bank of Pakistan (NBP) President and CEO Saeed Ahmad told The Express Tribune.“Islamic Development Bank (IDB) has also activated a $4.5 billion credit facility to Pakistan,” he said.In a brief note to clients, Topline Securities said the recent news flow regarding loan from China of $2 billion and possible assistance from Saudi Arabia is helping the foreign exchange market.A currency dealer at the Dollareast Exchange Company said the open market was currently awaiting clarity on the exchange rate.“We are waiting for the dollar’s rate (for open market) to resume trading.”However, later in the day, currency dealers were said to be trading the dollar at Rs118 and Rs122 - a spread of Rs4 - as exchange rate fluctuation and volatility created uncertainty.Over the weekend, the spread - difference between buying and selling rates - had gone as high as Rs13, signifying expectation that the rupee was set to appreciate this week.