The euro falls again against the lek, what are the reasons

2023-02-16 17:27:15Biznes SHKRUAR NGA REDAKSIA VOX
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The euro is experiencing further decline in the foreign exchange rate with the lek during this week.

According to the official exchange rate of the Bank of Albania, the euro was exchanged on Thursday for 115.62 ALL. The European currency is approaching the lowest levels recorded this year, while it has lost approximately one point in the exchange rate with the lek since the beginning of February.

According to agents, the foreign exchange market is returning to the dynamics of the end of last year, characterized by an abundant supply of the European currency and a lukewarm demand for it.

If we look at the historical data, such a performance has not been very typical for the first quarter of the year, which has generally marked the most favorable period for the euro.

This has been related to both supply and demand factors for the European currency. The first quarter is estimated to have less foreign currency inflows compared to other periods of the year, when especially the impact of tourism is higher.

On the other hand, the demand for euros in the first quarter usually increases, influenced by the needs of imports, the closing of balances and the purchase of currency for the conversion of profits, mainly by businesses with foreign shareholders.

For these reasons, in the first quarter of the year, the exchange rate of the euro during the first quarter usually corrects the seasonal depreciation recorded during the month of December. But, this year, the lek is quickly regaining ground and is already at the mid-December levels.

According to experts, one of the factors could be the purchase of euros in large quantities at the end of December and the beginning of January, taking advantage of the historically low exchange rate of the European currency. They hypothesize that many businesses may have made purchases in advance for the needs of the first quarter, thus diluting the demand for foreign exchange at this time of the year.

Another factor that may have moved the supply-demand balance in the foreign exchange market was the energy situation in the country. After the month of November, the Albanian Electric Power Corporation curbed energy imports, even moving into an exporting position, due to the large water flows and the high production of energy in hydropower plants. After November, KESH sold around 47.5 million euros of electricity, of which almost 19 million euros during 2023./ Monitor

 

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