The Lek regained ground against the Euro this week, as did other currencies

The exchange rate between the Euro and the Lek this week had a downward trend, after the strong growth of the previous week. According to the official exchange rate of the Bank of Albania, the Euro was exchanged on Friday at 108.42 ALL.

Although it marked a slight increase compared to Thursday, in the space of one week the Euro has lost approximately 2.2 points in the exchange rate with the Lek.

The progress of the Euro exchange rate remains decisive for the exchange rate of other currencies as well.

The American dollar this week had a downward trend and on Friday was exchanged at 100.73 ALL, down almost 2.6 ALL compared to a week ago.

Even the course of the British Pound recorded a downward correction and ended the week at the level of 126.68 ALL, 2.3 ALL less compared to the previous week.

Last week, the Euro registered a strong increase to approximately 5.5 Lek and managed to regain all the ground lost during the three months of summer.

On August 25, the Euro reached ALL 110.58, the highest level since the end of May. However, during this week part of the strong growth of the previous week has been corrected and currently the Euro-Lek exchange rate is approximately at the levels of the month of June.

According to agents, these rate movements largely reflect the fading of the seasonal effect. According to official statistics, this year Albania attracted a record number of foreign tourists.

This is believed to have been accompanied by larger than ever foreign exchange inflows during the summer season. The high offer of the Euro, intertwined with a tighter offer of the Lek, due to monetary and fiscal policies of a restrictive nature, caused the Euro to fall to historic lows this year, approaching very close to the limit of 100 ALL on July 20.

However, the strong downward trend of the Euro exchange rate this year has also brought about a higher volatility of the exchange rate. The decline has been interrupted, from time to time, by periods of strong exchange rate growth, as happened at the end of August.

Experts believe that these strong fluctuations are mainly caused by the speculative behavior of market actors and the intention to take advantage of the historically low levels of the exchange rate to buy at a cheap price.

According to them, such a phenomenon may have happened last week as well. Since the tourist season has entered the final phase, many entities may have rushed to buy Euros, due to the expectation of an increase in the exchange rate after September.

This resulted in a strong increase in the rate last week, which, however, was partially corrected this week.

Given that this year the exchange rate has had an unprecedented volatility, agents think that forecasts have become more difficult.

Although from September onwards, a decrease in foreign exchange flows is expected compared to the levels of the summer season, the determining factor in the trends of the exchange rate will be the economy's demand for foreign currency.

In the event that, as hypothesized, many entities have purchased the necessary currency during the summer, this may translate into a lukewarm demand in the first months of autumn.

In such a scenario, agents do not expect a very significant increase in the Euro exchange rate. However, the market can also be affected by completely unpredictable factors, such as electricity import needs, which will be determined to a large extent by atmospheric conditions and flows in hydropower basins.

Furthermore, the movements of the Bank of Albania's monetary policy and the government's budget policy can also have an impact on the exchange rate.

In the event that in October the Bank of Albania will raise the basic interest rate again, in theory this would create new appreciation pressures for the Lek.

On the other hand, if the government will increase the pace of budget spending in the last months of the year, this may have an impact in the opposite direction, increasing the likelihood of a devaluation of the Lek./Monitor