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The euro starts to fall again, falling below 102 lek

The euro starts to fall again, falling below 102 lek

The Euro-Lek exchange rate continues to fall and has touched a new minimum level for 2024.

According to the official exchange rate of the Bank of Albania, the Euro was exchanged on Thursday at 101.65 ALL, dropping for the first time this year below the limit of 102 ALL. This is the lowest level of the Euro-Lek exchange rate since December 7, 2023.

The rates of annual decline of the Euro-Lek exchange rate have accelerated and currently the European currency is being exchanged down, by more than 10% compared to the same period a year ago.

The American Dollar moved in the opposite direction, since Thursday it increased by 0.74 Lek and reached the quota of 94.7 Lek, reflecting a strengthening of the American currency against the Euro in international markets. However, even in the case of the dollar, the longer-term trend appears to be downward. On an annual basis, the dollar is also down by 8.4%.

The British Pound is also on the decline, since on Thursday it was exchanged at 118.74 Lek, the lowest level for 2024. The exchange rate of the Pound with the Lek is down by 7.6% compared to the same period a year ago.

Foreign exchange agents state that the supply of European currency in the market is high, in line with expectations for a further increase in tourism figures for this year. This effect is already being felt throughout most of the year and is no longer only associated with the summer season, when it marks the peak period anyway.

The strengthening of the Lek is supporting the fall in inflation, which in March dropped to 2.3%, the lowest level since 2021. Bank of Albania analyzes show that the main effect in reducing inflation was given by the imported inflation component, which is largely influenced by the exchange rate.

Lower inflation, combined with a further strengthening of the national currency, makes a further rise in interest rates unlikely at the moment. In fact, if these inflation and exchange rate trends continue, even the Bank of Albania may start thinking about returning to easing monetary policies.

The strengthening of the Lek increases the purchasing power of domestic consumers and makes the consumption of imported goods and services cheaper. Also, it favors borrowers in foreign currency with income in Lek, who pay less today for their loans.

On the other hand, the strengthening of the Lek can be a threat to the competitiveness of exports of goods and services. /Monitor

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