18.01.2019

Foreign exchange market, exchange rate developments, and international reserves 2018

Central Bank of Iceland and the mountain Esja

The króna depreciated by 6.4% in 2018, and turnover in the interbank foreign currency market contracted sharply year-on-year. In H2/2018, the Central Bank sold currency in the interbank market three times, with the aim of mitigating fluctuations in the exchange rate of the króna. The Bank’s net foreign currency sales in the market totalled 2.9 b.kr. during the year.

The exchange rate was relatively stable in the first eight months of the year, and turnover was limited. The market grew turbulent in the autumn, partly because of uncertainty in the air transport sector, and the currency weakened. In December, the exchange rate rose again after a relatively sharp decline since the beginning of September. The Central Bank then bought currency in the interbank market for the first time in more than a year.

At the beginning of November, an amendment was made to the special reserve ratio provided for in the Rules on Special Reserve Requirements for New Foreign Currency Inflows. The ratio was lowered from 40% to 20%.

The international reserves amounted to 736 b.kr. at the year-end, or 26% of GDP.

 

This information is published in a press release from the Central Bank of Iceland. See here the whole press release with tables and charts:

Press release no. 2/2019, January 18,  2019: Foreign exchange market, exchange rate developments, and international reserves 2018.

Back