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The euro falls again, touching a new historical record

2022-12-20 17:27:02Biznes SHKRUAR NGA REDAKSIA VOX
The euro falls again, touching a new historical record
The euro falls again, reaching a new record of 114.35 ALL

The exchange rate of the Euro with the Lek fell again on Tuesday, touching a new historical record.

According to the official exchange rate of the Bank of Albania, the Euro was exchanged for ALL 114.35, a daily decrease of 0.17 points. Foreign exchange agents state that the fall of the Euro is mainly due to a rather high supply of foreign currency in the local market.

This year, foreign exchange supply has been generally high and the Euro exchange rate has broken record after record low. In the second half of December, this offer is also affected by the effect of seasonality.

The end of the year holidays are accompanied by an increase in incoming tourism, but also the return of immigrants to their families. This translates into an increase in Euro inflows into the country, lowering the exchange rate of the European currency even more.

Meanwhile, the increase in the supply of Euros has also been influenced by other, temporary factors. This month, one of the commercial banks in the country has converted part of its share capital from Euro to Lek, a factor that has influenced the further devaluation of the European currency.

Demand factors also had a significant impact on the performance of the Euro exchange rate. Thanks to the improved water condition, the Albanian Electricity Corporation (KESH) has significantly reduced electricity imports, and in recent weeks has exported large amounts of energy.

The drop in demand from KESH has been an important factor in the balance of the exchange rate, if we consider that during 2022 this company is estimated to have imported energy for about 30 million euros per month.

The historical decline of the Euro in the Lek exchange rate is difficult to explain from the Balance of Payments statistics. Data from the Bank of Albania show that this year the current account deficit is at levels similar to 2021.

However, foreign direct investments appear to be increasing. Market agents think that especially the increase in investments of foreign citizens and non-resident Albanians in properties in Albania may also have played an important role in increasing foreign exchange inflows and increasing the supply of euros in the market.

On the other hand, market agents remain convinced that informal currency flows have an important role in the performance of the exchange rate.

In an inflationary situation, the strengthening of the Lek against the Euro is favorable for most market players. The strong lek amortizes part of the imported inflation and softens the effects of price increases for consumers and supports the efforts of the Bank of Albania to reduce inflation, through the increase of interest rates.

The strengthening of the Lek is also helping borrowers with loans in the European currency, but with income in the local currency, to partially mitigate the effects of the increase in variable interest loan rates.

On the other hand, those economic actors who have income in foreign currency and expenses in Lek, such as exporters of goods and services or recipients of remittances, have losses from the overvaluation of the Lek./Monitor


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