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The significant amounts of Euro withdrawn from the market by the Bank of Albania are not giving significant effects on the increase of the European currency rate.
The Bank of Albania held on Wednesday the planned auction for the purchase of currency, for the needs of the administration of the foreign exchange reserve.
The amount planned to be purchased in the first round of the auction was between five and nine million euros, while the Bank of Albania made purchases in the upper range, for a total of 9 million euros. The purchases in the first round were made at a rate that was between 106.72 and 107.13 ALL. The weighted average rate of purchases in the first round was ALL 106.99. The Bank of Albania also exercised the purchase option in the second round, for an additional amount of 6 million euros, with the average purchase rate in the first round, of 106 ALL. In total, the amount purchased at the May 21 auction reached 15 million euros.
The auction held this week was of the one-month forward type. For 2023, the Bank of Albania aims to further develop the use of forward agreements, which are evaluated as an instrument that can encourage commercial banks to take steps towards the development of the money market.
Of the 16 anticipated auctions, half are anticipated with forward agreements and half with classic spot agreements (with purchase on the auction date). In the previous two years, the Bank of Albania has usually used forward agreements with a one-week term, while for 2023 the forward agreements will have a longer term, one month.
Despite the purchase of a significant amount by the Bank of Albania, the fall of the Euro in the Lek exchange rate continued yesterday and the European currency was exchanged at an average of 106.78 Lek. This tendency was also clearly visible in the previous months. In total, in the two auctions in May, the Bank of Albania bought 32 million euros in the domestic financial market, while in April it bought another 25.2 million euros.
Although the central bank has withdrawn at least 80 million euros from the market in the last three months, the exchange rate of the Euro with the Lek during these months has suffered a continuous decline. Foreign exchange agents state that the supply of Euros in the foreign exchange market is very high and the demand of the Bank of Albania has not played a significant role in curbing the fall of the European currency.
The purchases of foreign currency by the Bank of Albania are part of the auction program for the management of the foreign exchange reserve and are not intended to influence the exchange rate. This year, the Bank of Albania has planned to hold a total of 16 auctions, in which it expects to purchase an amount between 160 and 220 million euros for 2023. This amount represents a significant increase compared to last year's figures, when purchases of currency were approximately 140 million euros.
At the end of April, the country's foreign exchange reserves were worth 4.95 billion euros, a slight increase of 1.2% compared to the same period a year ago./Monitor
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