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On June 3, the Bank of Albania conducted its third annual foreign exchange purchase auction for the purposes of foreign exchange reserve management.
According to market data, a total of 13.2 million Euros were bought at the auction, or almost the entire amount offered by the participants.
The amount foreseen to be bought in the first round of the auction was between 5 and 8 million Euros and the Bank of Albania decided to buy in full the upper value of the interval of eight million Euros.
The purchases in the first round were made at a rate that was in the range between 120.29 and 120.41 Lekë.
The weighted average exchange rate was 120.37 Lekë. The Bank of Albania also exercised the purchase option in the second round, for an additional amount of 5.2 million euros, with an average exchange rate of 120.37 Lek.
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 against the Euro. The strong positions of the Lek in the exchange rate have made the Bank of Albania resume the normal program of buying the Euro for the needs of foreign reserve management.
Despite the significant amount purchased last week by the Bank of Albania, even in this case the Euro / Lek exchange rate did not show any significant movement in favor of the European currency. On the contrary, according to the official exchange rate of the Bank of Albania, the Euro on Friday depreciated further and closed last week at the value of 120.29 Lekë.
The Lek continues to maintain strong positions in the foreign exchange market with the Euro. In the second half of May, the Euro even touched a new historical minimum, in the amount of 119.91 Lekë.
Then, unexpectedly, the Euro easily regained ground, just in the week of the Conference League final, when most agents were expecting a further decline. However, last week the Euro returned to decline and the exchange rate dropped by about 0.7 Lekë compared to a week ago.
So far, the Lek has resisted the risks associated with high inflation and the deepening of the current account deficit, even achieving the best historical position against the Euro. With the start of the summer season, expectations are in the direction of a further appreciation of the Lek, due to the seasonal increase in the inflow of the Euro, mainly related to tourism.
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