TIRANA (Albania), August 13 (SeeNews) – Albania's lek currency has appreciated beyond fundamentals in the second quarter of 2018, as the foreign exchange risk premium suffered a negative shock, the country's central bank said.
The rapid appreciation of the rate in the first two quarters of 2018 seems to be dictated by strong short-term shocks, which appear to have originated in the foreign exchange market and have steered the exchange rate away from its long-term equilibrium, Bank of Albania said in a quarterly monetary policy report last week.
In annual terms, the lek appreciated on average by 5.2% against the euro in the second quarter of 2018, compared with a rise of 2.5% in the first three months of the year, driven by the foreign currency supply and change in the behaviour of economic agents and financial intermediaries, the central bank said.
The Albanian lek strengthened in real terms against all currencies of the trading basket in the presence of inflation differences that are largely unchanged at home from those of the region, the central bank said.
"An important indicator of uncertainty in the domestic foreign exchange market is the performance of the bid-ask spread. It shows a rapid expansion of the spread during the last months of the second quarter, which reflects the increased uncertainty in the foreign exchange market and the unwillingness of banks to position themselves in the market."
Earlier this month, central bank governor Gent Sejko said the domestic financial market remains calm and liquid, but appreciation pressures of the Albanian lek remain in the foreign currency segment.
“The recent monetary policy measures - lowering the policy rate to 1.0% and intervention in the domestic foreign exchange market, with a view to preventing the rapid appreciation of the exchange rate, have proven to be effective,” Sejko noted, adding that the Bank of Albania is of the opinion that the current monetary policy stance remains adequate.