Stronger than ever before, Euro depreciation affects new records

Leku has started this week with a further strengthening in the exchange course of Euros and other key currency.

According to the Bank of Albania's official exchange rate, Euros changed on Monday to 102.36 leks, down by 0.99 last week. With an annual basis, the Euro-Lek exchange rate has reached a 12.7% drop. For currency exchange agents, the euro drop is a confirmation of market expectations.

The Euro-Lek course began a significant decline since the beginning of the second quarter, while the arrival of the tourist season is further sinking the European currency. Already available data has shown a record number of foreign tourists and inflow waves from tourism. It is believed that major currency flows are the main factor affecting the rapid and unprecedented devaluation of the European currency.

In addition to tourism, wave flows are being influenced by the revival of remittances and by high foreign investment assets. The new trend of recent years is to increase foreign citizens' investments in real estate in Albania.

Exchange agents think information is also a factor that has its own impact on the currency exchange course. The agents expect, due to the seasonal effect, the Euro-Lek course will continue to pursue a downward trend at least until the first week of August.

With its strong decline, the Euro is pulling the other major waves.

The British government has fallen to the new historical minimum of $1 119.12.

The American dollar has dropped to the value of 91.03, the lowest level since 2009.

The Swiss franc has dropped to a level of 106.11, the lowest level since 2010.

Euro is the reference currency for the financial sector in Albania, and the course of other currencies is determined by the value of the euro combined with the European currency exchange rate against each. In recent weeks, the decline of the euro to Lek is being accompanied by a drop in key waves against Euros on international markets. As a result, this has led to a record decline for most foreign currency against Lek.

Lek's strengthening in the exchange course, especially against Euros, brings significant impacts on the economy. The strongest money lowers the price of imports of goods and services, and in theory puts on declining pressures on import prices and inflation.

Strong lek is also favouring foreign currency borrowers, contracting the value of their obligations in local currency. The biggest beneficiary among them is the Albanian government itself, which is benefiting a significant decline in foreign currency debt portfolio.

But a strengthening in these sizes of Lek is damaging those economic subjects with foreign currency revenues and expenses in Leca, starting with exporters. Strengthening Lek by about 13% in a year has a strong negative effect on profit margins, and in these conditions, alternatives are price hikes, spending cuts, or finding ways to increase productivity.

One category that is significantly affected by Lek's strengthening are families dependent on remittances. Wallification has reduced their purchasing power and potentially can be a factor that will encourage immigrants to send more money, which, in turn, would create new pressures to strengthen Lek.

Strong money is increasingly lowering the value of foreign currency savings of Albanians. However, since the Albanian economy is Euro-eurod to a high degree, this factor does not appear to be displaceing the keeping of savings at Euro, as the bank deposits data shows. /Monitor. al