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Euro hits 'bottom', European currency drops to new historic low

Politiko 2025-06-13 14:30:28

Euro hits 'bottom', European currency drops to new historic low

Illustrative photo

The Euro/Lek exchange rate fell again on Friday and hit a new historical minimum. According to the official exchange rate of the Bank of Albania, the Euro was exchanged for 97.88 Lekë, the lowest level ever recorded.

Exchange agents believe that the decline in the Euro exchange rate seems to be related to the significant increase in tourism-related foreign exchange inflows during June. A significant decline was also recorded on the eve of last weekend, when the Euro fell again below the value of 98 lek.

The Bank of Albania intervened in the foreign exchange market at the beginning of last week to buy Euros, causing the European currency to temporarily rise above the 98 lek level.

But, as the weekend approaches, it appears that downward pressures on the Euro have strengthened again, pushing the European currency to its lowest value ever recorded at the official exchange rate.

The summer season, as expected, is also influencing this year a further decline in the Euro-Lek exchange rate. Starting from the second half of April, the Euro-Lek exchange rate has undergone a downward shift. Data from recent years show that such a decline is more or less common and is related to the increase in incoming foreign exchange flows, especially related to the increase in the number of foreign visitors. The pressure on the Euro exchange rate has further strengthened with the beginning of June, when the summer season becomes more intense.

On the other hand, the tightening fiscal policy, with large surpluses, of recent years also tends to tighten the supply of Lek over the months, increasing the pressure for the appreciation of the local currency. By the end of the 4-month period, the budget was again in significant surplus, at the value of 38 billion Lek, although down by 24% compared to the same period a year earlier.

Last year, the Bank of Albania limited the exchange rate decline to the level of 98 lek, through large foreign exchange purchases, which began in May and continued for almost the entire remainder of the year. The Central Bank purchased approximately 933 million euros in the domestic foreign exchange market in 2024, at the highest historical value.

Looking at exchange rate trends, it is expected that foreign exchange purchases by the Bank of Albania will continue to be significant this year. With inflation below the 3% target, the Bank of Albania still has room to intervene in the exchange rate, while staying in line with its main legal objective./ Monitor