The exchange rate of the Euro with the Lek is showing an almost unprecedented volatility.
According to the official exchange rate of the Bank of Albania, the Euro was exchanged on Thursday for 104.7 ALL, an increase of 2.75 points compared to yesterday.
After falling by roughly three points on Monday, the rate has moved in the opposite direction in almost the same arc within three days. According to experts, movements with such intervals in the opposite direction are indicators that the progress of the course is not normal and the market seems under the influence of psychological or speculative factors.
According to sources from the market, the strong increase in the exchange rate that started on Wednesday afternoon may be related to the signals given by the Bank of Albania. Governor Sejko said yesterday that the sharp drop in the exchange rate during July may not be a reflection of fundamental market conditions, warning of an intervention by the central bank.
According to the Governor, this intervention can be done by increasing the purchase amounts in the auctions already planned by the Bank of Albania, in order to manage the foreign exchange reserve.
Sources say that the banks have been informed that the amounts purchased in tomorrow's auction are expected to be significantly greater than the previously estimated values. All these signals may have led to an increase in the demand of banks in the foreign exchange market and the rapid growth of the exchange rate.
Although he confirmed his commitment to the free exchange rate regime, Governor Sejko hinted yesterday that the Bank of Albania will not allow a further appreciation of the local currency, at least in the short term. In this sense, perhaps the goal is that the Euro is not allowed to fall below the quota of 100 lek.
In yesterday's statement, the Supervisory Council stated that the strengthening of the Lek has played an important role in protecting the Albanian economy from the inflationary wave and, among other things, has allowed the maintenance of lower interest rates compared to other European economies. . But, on the other hand, the further strengthening of the Lek could seriously damage the exporting sectors of the economy, including tourism, and damage the competitiveness of the Albanian economy.
However, the mechanism that the Bank of Albania has chosen to do this is controversial. Currency purchase auctions are an instrument used to manage the foreign exchange reserve and as a rule are not intended to influence the exchange rate. Their use seems like an artifice to avoid direct intervention in the market, which the Bank of Albania can only do to correct short-term exchange rate disturbances.
According to Governor Sejko, the Bank of Albania has withdrawn 170 million euros from the market so far this year, mainly through auctions programmed for the needs of the foreign exchange reserve, but also through a direct intervention on July 20, Monitor reports.