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The "miracle" lasted a week, the Lek starts the week stronger against the Euro

Politiko 2023-07-31 14:19:27

The "miracle" lasted a week, the Lek starts the week stronger against

The exchange rate between Euro and Lek has started this week in strong decline, after last week's increase.

According to the official exchange rate of the Bank of Albania, the European currency was exchanged today at 102.87 ALL, down by almost three ALL from the level where it closed last week.

According to market agents, last week's increase was largely unwarranted and the result of a kind of panic as a result of concentrated demand. Most likely, such demand came as a result of purchases in large amounts by entities that had decided to take advantage of the favorable rate offered by the peak of the summer season.

As soon as this demand ran out and the banks closed the positions from the sales of the currency, since the exchange rate of the Euro has fallen immediately.

The fall in the Euro exchange rate has been reflected in similar proportions in the exchange rate of other main currencies. The American dollar was exchanged at 93.22 ALL, down 3.33 ALL compared to the end of last week. The British pound was exchanged at 119.8 ALL, down 3.92 ALL from the end of last week. The Swiss franc was exchanged at 107.19 ALL, down 3.63 ALL compared to Friday.

The period between the end of July and the beginning of August also marks the peak of the seasonal effect on the exchange rate, due to foreign currency inflows from tourism. For this reason, it is fragile for Lek's positions to remain strong in the short term.

According to the Bank of Albania, the marked strengthening of the Lek this year has come mainly as a result of the improvement of the Balance of Payments and the increase in inflows, especially from tourism, remittances and foreign direct investments. The appreciation of the Lek is helping the Bank of Albania in its objective of reducing inflation, as it is giving a positive effect in reducing the foreign currency debt of the public and private sector. The strengthening of the Lek is making imports cheaper and is one of the reasons why Albania has had lower inflation compared to most other economies. It is believed that the effects of the new wave of strengthening of the Lek, after the spring, will be more tangible in consumer prices during the following months.

But, on the other hand, the strengthening of the local currency is negatively affecting the exporting sectors of the economy, which have income in foreign currency and expenses in Lek. The strongest effects can be felt in the fashion sector, where the opportunities to correct margins as a result of the strengthening of the Lek are limited. However, the strengthening of the Lek is also negatively affecting other sectors, including tourism, making them less competitive in the sale of goods and services to foreign buyers./Monitor