Euro takes a drastic turn, here's what's happening with the foreign currency

The euro has regained ground in the exchange rate with the lek in recent days.

According to the official exchange rate of the Bank of Albania, the euro was exchanged today for 114.94 ALL, increasing for the second day in a row. Since Wednesday, the euro has regained almost a point in the exchange rate with the lek.

At the beginning of this week, the euro fell below the level of 114 lek and marked the lowest point of this year, at the level of 113.97 lek, while it seems that this decline is being partially corrected.

Agents of the foreign exchange market say that, despite the growth of the last few days, the market does not observe any broad-based demand for the European currency. Most likely, the increase could be influenced by sporadic operations in large values.

A factor may also be the need of large actors of the foreign exchange market (banks) to close the positions that may have been opened in the last weeks, due to the increase in the volume of sales of the euro, an increase driven by the favorable exchange rate for buyers.

Such a phenomenon was also observed in the last days of December, when the drop of the exchange rate to the minimum historical levels increased the demand for the European currency and this subsequently brought about a movement of the exchange rate in the opposite direction, increasing.

Market agents state that the balances of demand and supply in the market do not have large fluctuations and the exchange rate perspective remains in favor of the lek, which is believed to continue to maintain strong positions compared to previous periods.

If we look at the trends of the exchange rate in the longer term, the lek is continuing to appreciate in the exchange rate with the lek. The average exchange rate for the period January 1-March 16, 2023 is at the level of ALL 115.75, this level is 5.3% lower compared to the same period a year ago.

According to experts, the strengthening of the lek can be explained, in the first place, by the positive performance of foreign exchange inflows, mainly influenced by tourism, the growth of foreign investments, especially in the real estate sector, and the constant flows of informal foreign exchange flows.

At the beginning of this year, a positive effect may have come from the improvement of the trade balance and the significant decrease in the deficit in January.

On the other hand, the tightening monetary policy of the Bank of Albania may have had a certain impact, which was accompanied by an increase in interest rates and yields for financial instruments in Lek.

This may have influenced greater demand for lek and increased supply of euros, especially in the last quarter of last year, when the increase in yields reached its peak. Source/Monitor