Pak Rupee Strengthening- Will Car Prices Come Down?

General Elections 2018 has brought stability to the exchange rate since the very first day after polls’ results were announced in Pakistan.

The dollar on Friday continued losing its value against the rupee, dropping even below the interbank rate suggesting ample supply of the US currency in the open market. The President of Forex Association of Pakistan, Malik Bostan said the dollar was traded as low as Rs 126-126.50 in the open market – well below the interbank rate of Rs 128. Since Monday, the dollar has lost Rs 4.30.

Related: Rupee Hits Record Low at 128 Against US Dollar

They stability in the results of general elections was the key reason for the appreciation of the local currency. Furthermore, a crackdown on illegal money exchanges during the last few months and a smooth supply to the Exchange Companies from the banking sector have supported the Pakistani Rupee in the open currency market. President of Exchange Companies Association of Pakistan (ECAP) Zafar Paracha said:

On the directives of the State Bank of Pakistan (SBP), all the borders,  especially the Afghanistan border have been sealed before the election 2018 which could also be a major reason of higher supply in the open currency market.

According to experts, the Rupee may further appreciate against the dollar in open market in the future as the supply of dollar is higher compared to the previous week.

Since December 2017 when the Pak Rupee was hovering around Rs 105 against the US dollar, it has witnessed four round of devaluations. And during the two months of the caretaker government, the local currency had hit the rock bottom against the dollar, when the currency was traded at Rs 130 against US dollar.

Related: Car Sales Fall for Second Consecutive Month on Tax-Related Curbs

Local auto assemblers were quick to respond to Rupee devaluation by transferring the impact on the consumers. Car prices were revised three to four times in the last six month with prices increasing up to Rs 200,000 on each model.

Now when the Rupee is gaining its strength back, how long will it take the auto assemblers of Pakistan to roll back their prices is yet to be observed. In this scenario, analysts believe that the assemblers will churn out huge profits when the Rupee is regaining its value back while the prices of automobiles remain unchanged.

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