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After the temporary suspension during March and April, the Bank of Albania will resume this month the auctions scheduled for the purchase of Euro in function of the needs of the foreign exchange reserve of the country.
In the auction that will take place this week, the central bank expects to buy in the first round an amount in the range between five and eight million Euros. However, the amount of purchases may be even higher, because the regulation of the Bank of Albania determines the possibility of purchases in the second round, with the average exchange rate resulting from the bids received in the first round of the auction.
In the annual calendar of foreign exchange market interventions, compiled at the end of 2021, the Bank of Albania had planned 15 auctions for the purchase of foreign currency. Based on the decision of the Monetary Policy Implementation and Advisory Committee at the Bank of Albania, it was foreseen that for 2022 an amount will be purchased in the domestic foreign exchange market in the range between 140 and 200 million euros. But in early March, the exchange rate went through a moment of destabilization, mainly related to OSHE’s high demand for currency and a wave of panic sweeping the emerging market.
The Bank of Albania intervened in the foreign exchange market by selling foreign currency and at the same time decided to cancel the three purchase auctions, scheduled during March and April. After the intervention of the Bank of Albania, the market stabilized and the Lek began to regain ground during the Euro. Moreover, at the end of April, the exchange rate between the Euro and the Lek equalized again the lowest historical level of 120.18 Lek, which was last recorded in 2007. The strong positions of the Lek in the exchange rate have made the Bank of Albania resume the normal program of purchasing the Euro for the needs of foreign exchange reserve management.
The Lek is gaining points again in the exchange rate with the Euro this week as well. According to the Bank of Albania, the Euro was exchanged on Friday at 120.29 lek, close to the historical minimum of 120.18 lek in 2007.
Experts explain the decline of the Euro with a lukewarm demand for the European currency, while in parallel inflows appear to increase. The higher offer can also be explained by the approach of the summer season and the increase of short incoming trips by tourists, especially from neighboring countries. Rising inflation and the tense situation in commodity markets created pessimistic expectations about the foreign exchange rate and experts expected a kind of upward shift in the relationship between the Euro and the Lek.
But, this has not happened, although statistics show an increase in the current account deficit in the last quarter of 2021, as well as the trade deficit during the first quarter of this year. The Governor of the Bank of Albania, Gent Sejko, said on Wednesday that the increase of the key interest rate at the end of March has helped stabilize the pressures on the exchange rate, implying that this move has strengthened the position of the Lek. However, foreign exchange agents remain skeptical about the real impact of key interest rate movements on the exchange rate.Monitor.al
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