Euro Exchange Rate Surges Against Albanian Lek

The Euro to Lek exchange rate witnessed a significant increase today.

According to the official exchange rate of the Bank of Albania, on Wednesday, the Euro was traded at 104.63 lekë, up by 1.7 lekë compared to Tuesday.

Exchange rate lek for 1 euro, January 4, 2024 - March 27, 2024
 Exchange rate lek for 1 euro, January 4, 2024 - March 27, 2024, source: Monitor
The Euro exchange rate has surged within a day to the highest level of the year 2024, whereas last week it marked the lowest levels of this calendar year. Such a strong daily movement of the Euro hasn't been recorded since August of the previous year.

According to financial sector sources, the sharp increase in the Euro is the result of large-scale purchases by specific entities, which are difficult to identify.

Such a significant rise in the exchange rate within a single day once again demonstrates that the currency market in the country is highly volatile and fragile. Such sharp and short-term fluctuations in the Euro-Lek exchange rate have occurred frequently in the last two years.

The increasing volatility of the exchange rate in recent years may have encouraged more speculative behavior from market actors, which, in the conditions of a small currency market, cause significant short-term fluctuations. However, the experience of recent years has shown that these moments are short-lived, and the exchange rate quickly returns to long-term trends.

As always, the sharp rise in the Euro exchange rate has been accurately reflected in the rates of other currencies as well. The US Dollar also rose by approximately 1.6 lekë, reaching its highest level since February, at 96.52 lekë. The British Pound increased even further, by nearly 1.9 lekë, reaching 121.94 lekë, also the highest level since mid-February.

The trends in the available external position of the economy so far do not signal any organic shift towards an increase in the Euro-Lek exchange rate.

The current account deficit hit its lowest historical value for the previous year. According to data from the Bank of Albania, this deficit decreased to the value of 191 million euros, a decrease of 78% compared to 2022. Even the last quarter of 2023 resulted in a significant decline in the current account deficit, to the value of 232 million euros, approximately half of the deficit recorded in the same period a year earlier.

Moreover, the record annual value of foreign direct investments for 2023, nearly 1.5 billion euros, has exceeded the value of the current account deficit by more than seven times.

Entering the second quarter, it is expected that currency flows in the Albanian economy will increase, mainly as a result of tourism. Experts believe that at this moment it is difficult to identify any factor that could lead to sustainable increases in the Euro-Lek exchange rate. Wednesday's rise has all the characteristics of a panic that is becoming common in the currency market and follows large and focused demands from specific entities for foreign currency.
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