The euro dropped this Friday for the first time below the limit of 120 ALL, marking the lowest historical level in the exchange rate. 

According to the official exchange rate of the Bank of Albania, the Euro was exchanged on Friday at 119.96 ALL, touching a new record in a depreciation cycle that, with small breaks, had started last year. 

Foreign exchange market agents say that the demand for Euro remains low, while in this period inflows have improved significantly thanks to increased exports and inbound tourism. 

Another factor that has probably started to affect the exchange rate between the Euro and the ALL is the final of the Conference League, which will take place in Tirana next week. At least 20,000 foreign fans are expected to enter the country for this event, who will bring large sums of foreign currency with them. 

Market agents think the match will have an inevitable effect on the foreign exchange market. The Albanian foreign exchange market is relatively small and inflows in the order of several million Euros concentrated in a few days, will increase the supply of the Euro and will further devalue the European currency against ALL. 

It is very likely that next week the Euro will touch new declining records in the exchange rate with ALL. 

Even further, the fact that we are before the summer season makes the expectations to be mainly in favour of a further appreciation of ALL in the exchange rate against the Euro. 

This increase in the value of ALL for most experts has been unexpected, given the rise in prices and the widening trade deficit, especially starting from the last quarter of last year. But even the increase in imports has not devalued the ALL. 

Experts think that the wave of panic that swept the economy after the outbreak of war in Ukraine caused many people to create stocks of consumer food products. This may have somewhat reduced the flow of imports in recent weeks. 

Also, electricity imports in recent months are believed to have been in lower quantities, another factor that has further softened the demand for Euro in the foreign exchange market. 

Consumers generally benefit from the strengthening of the ALL in this inflationary period, as do borrowers who have liabilities to repay in European currency. Those who lose from the strengthening of the Lek are mainly the exporting sectors of goods and services in the economy. 

Meanwhile, the ALL closed this week by strengthening it in exchange rates with other currencies exchanged in the Albanian market. This strengthening is not related to internal factors, but simply reflects the performance of the exchange rate of other currencies against the Euro. Even the strengthening against the currencies of trading partners and mainly against the US Dollar has a mitigating effect on the transmission of inflationary pressures coming from imports.