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Euro below the dollar for the first time in 20 years. Even in Albania, it drops to the historical minimum

2022-07-13 17:33:48Biznes SHKRUAR NGA REDAKSIA VOX
Euro below the dollar for the first time in 20 years. Even in Albania, it drops
Euro

The euro has fallen below the dollar for the first time in 20 years as the war in Ukraine pushes the common currency down, writes the BBC. One euro was trading at $0.998 on the foreign exchange market at 12:45 GMT, down 0.4% in intraday trading.

Fears that Russia could limit Europe's energy supplies have increased the chances of a recession in the eurozone.

The European Central Bank has lagged behind other central banks in raising rates, further weakening the euro. Currencies tend to appreciate when the respective central bank raises interest rates. The dollar has risen in recent months, boosted by interest rate hikes by the US Central Bank.

A weakening currency will make imports more expensive for eurozone countries, especially dollar-priced goods like crude oil.

This could contribute to even higher inflation in the eurozone, which is already running at 8.6%. The euro has fallen almost 12% against the dollar since the start of the year.

Even in the Albanian market, the euro continued to fall in the exchange rate with the Lek even today.

According to the Bank of Albania, the Euro fell to a new historical minimum of 117.32 Lek, 0.25 Lek less compared to Tuesday.

Agents of the foreign exchange market believe that the exchange rate is already significantly influenced by the summer season and by the increase in Euro flows, related to tourism. Based on the data so far, the number of foreign tourists this year is growing rapidly and has even exceeded the levels of 2019.

The quite positive expectations of the tourist operators for the summer season seem to be indirectly confirmed by the high supply of Euros in the market and the devaluation of the European currency against the Lek. As the tourist season is entering its peak, exchange agents believe that short-term expectations are in favor of a further appreciation of the Lek against the Euro.

The continuous strengthening of the Lek against the Euro, which is also the main currency of the country's commercial exchanges, plays a significant role in mitigating inflationary pressures from abroad and favors importers of goods and services, who buy in Euro and sell in Lek.

Favored are all entities that have liabilities in Euro and income in Lek, which includes the Albanian government as well as private entities that have loans in the European currency.

On the other hand, those who lose from the devaluation of the Euro against the Lek are mainly the exporters of goods and services. In particular, the fall of the Euro can be a big problem for the fashion sector, which supports the competitiveness of the cheap active processing services it offers.


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