The European currency Euro continued to strengthen against the domestic currency Lek in the foreign exchange market on Wednesday.

According to the official exchange rate of the Bank of Albania, the European currency was exchanged on Wednesday (January 29) for LEk 99.71, up almost Lek 1 compared to Tuesday.

This is the highest level of the Euro-Lek exchange rate since the beginning of September last year.

According to foreign exchange market agents, the increase in the Euro exchange rate has come about due to high purchase requests from some specific banks in the sector. In general, currency purchases are made to meet the needs of clients, but in special cases, banks may purchase on their behalf, such as to close open positions in foreign exchange beyond the permitted regulatory levels, or even in the function of their direct needs.

For example, in March last year, the distribution of a large dividend by a bank led to a strong and short-term increase in the Euro-Lek exchange rate.

As has happened periodically in recent years, the increase in demand for the Euro immediately leads to a strong increase in the exchange rate of the European currency. This can be explained by the small size of the foreign exchange market in the country, which in these cases also seems to be affected by a kind of panic. However, in the past, these increases in the euro exchange rate have had a short-term trajectory and the market has calmed down over a time horizon of a few days, Monitor reported.

The domestic currency Lek has steadily strengthened in the exchange rate against the Euro in recent years. This appreciation, according to the Bank of Albania, is due to the improvement in the balance of payments, in particular the increase in foreign exchange inflows from tourism and high levels of foreign direct investment, especially in real estate. On the other hand, the strengthening of the Lek has received additional support from the austerity fiscal policy pursued by the Albanian government, with a budget balance that has been in surplus for most of the last three years.