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For the first time in 20 years, the exchange rate between the euro and the US dollar has reached parity, meaning that the two currencies have the same value.
The euro hit $1 on Tuesday, down about 12% since the start of the year. The change means that European companies and consumers will pay more for the goods and services they import, while European exports become immediately cheaper on international markets.
Likewise, the devaluation of the Euro against the Dollar is also reflected in the exchange rate of the Lek against the American currency. The dollar was exchanged today at 117.51 Lek, 0.79 Lek more compared to the end of last week.
The overvaluation of the Dollar plays an important role in increasing the price of some vital raw materials that are quoted in this currency, such as, for example, fuel or grain, making them more expensive for citizens.
Fears of a recession on the continent have already increased, fueled by high inflation and the uncertainty of energy supplies caused by Russia’s invasion of Ukraine.
The European Union is trying to reduce its dependence on Russian oil and gas, and at the same time, Russia has curbed gas supplies to several EU countries and cut the flow on the Nord Stream pipeline to Germany by 60%.
Now that critical part of Europe’s gas import infrastructure is closed for a short maintenance process. German officials fear it may not be lit again.
The energy crisis comes alongside an economic slowdown, which has cast doubt on whether the European Central Bank can adequately tighten policy to reduce inflation.
A series of aggressive interest rate hikes by central banks, including the US Fed, will keep pressure on the euro while sending investors to the US dollar as a safe haven, analysts say.
The US Federal Reserve is well ahead of Europe in terms of tightening, having raised interest rates by 75 basis points while signaling that more rate hikes are coming this month.
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