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The euro falls "to the ground", here is the new historical minimum that the European currency has reached
Written by SOT.COM.AL 9 Qershor 2023
The Euro closed the week with a new historical minimum in the exchange rate with the Lek. According to the official exchange rate of the Bank of Albania, the Euro was exchanged on Friday at 105.62 ALL. Since the beginning of June, the Euro-Lek exchange rate has fallen by 3.9%, while compared to a year ago, the exchange rate has fallen by 12.1%.
The devaluation of the Euro is pulling other major currencies down further.
The American dollar was exchanged today at 98.07 allek, at the lowest level since August 2011. The British pound dropped to a new historical minimum, at the level of 122.97 allek.
The Swiss franc also fell further to 108.86 ALL, the lowest level since June 2019.
Experts believe that the course performance during this period is the result of a very high foreign exchange offer in the local market, possibly combined with the psychological effect.
The market has created strong expectations that the Lek will continue to strengthen during the summer season, and this may have also led to a rush to sell Euros in recent weeks.
This has increased the supply even more, further devaluing the European currency. Since the Euro is the reference currency for the Albanian financial market, its devaluation is being transmitted to other currencies as well.
Seeing the rapid rate of decline of the Euro, especially in the last two weeks, there are already experts who think that reaching the limit of 100 lek this year cannot be ruled out.
The stronger lek than ever in the exchange rate has started to have significant impacts on the economy. The country's imports are becoming cheaper, although this is still not very tangible in consumer prices.
The strengthening of the Lek is giving great support to borrowers in foreign currency, reducing the equivalent value of the loan and the monthly installments, expressed in Lek.
Specifically for the banking sector, the strengthening of the lek is leading to a reduction in the size of the balance sheet, given that most of the assets are in foreign currency. The effects are expected to appear gradually more visible in the financial result, due to the negative effect that the exchange rate will bring to the net result from interests.
On the other hand, a strengthening of the Lek in these proportions will not pass without consequences for all economic entities that have income or net savings in foreign currency. The exporting sectors of the economy are receiving a strong blow from the strengthening of the Lek. Albanian exports fell by 3.5% for the 4th month of 2023, while for the month of April their decline reached 19%.
The very rapid strengthening of the lek this year is reducing the value of bank savings in foreign currency, but also the value of emigrants' remittances. Families that rely mainly on foreign exchange income have suffered a decline in purchasing power due to the exchange rate.
Retrieved from Monitor