The Euro exchange rate continues to fall this week, setting new historical records.

According to the official exchange rate of the Bank of Albania, the Euro was exchanged on Tuesday at Lek 99.6, the lowest level ever recorded.

The annual decline of the Euro-Lek exchange rate is already deepening again and has already reached approximately 6%.

According to foreign exchange agents, the main reason for the fall of the Euro in recent weeks is the withdrawal of the Bank of Albania from control over the exchange rate of the Lek with the European currency. Since May, the Bank of Albania had started the intervention in the foreign exchange market, in order not to allow the euro to fall below the limit of Lek 100.

The central bank managed to keep the rate above this psychological limit until the first ten days of August. However, on August 12, the euro fell below the Lek 100 limit for the first time, while a slow downward trend continued in the following days. The market expected an intervention by the Bank of Albania to return the euro above the limit of Lek 100, but this has not happened.

The Bank of Albania has not communicated a reason for this somewhat unexpected change in its approach to the exchange rate. In general, the central bank has been reserved in publishing data on direct interventions in the foreign exchange market. Governor Gent Sejko even refused to make public figures in his report to the Assembly, explaining that this information would be provided according to the deadlines set by the central bank for interventions in the money market, with a delay of about three months.

Officially, the Bank of Albania has argued the intervention in the exchange rate with its main legal objective, that of inflation targeting. This year, inflation has fallen below the target of the Bank of Albania and in July it reached 2.1%, the lowest level in the last three years. Not allowing a further strengthening of the Lek was intended to curb the further fall in inflation.

Meanwhile, the Lek continues to strengthen the exchange rate with other major currencies. In part, this is due to the strengthening of the euro, which remains the reference currency even in determining the exchange rate of the Lek with other currencies. Also, the devaluation of other currencies mainly the US dollar in foreign markets is affecting their decline even against the Lek.

The US Dollar was exchanged on Tuesday at Lek 89.93, touching the lowest level since the end of 2008. The strengthening of the Lek has had a significant impact on reducing inflation and has favored importers of goods and services from abroad. The Albanian government has generally had positive effects from the strengthening of the Lek because the exchange rate has been the factor with the main impact on the reduction of public debt in recent years.

Also, borrowers in Euro with income in Lek have had significant benefits in reducing the value of the loan and its installments.

However, the strengthening of the Lek has hit Albanian exports. For the 7 months, exports of goods were down by 14.5%. An increasingly strong Lek, combined with high pressures from the labor market to increase wages, is also hitting the service sector, starting with tourism.