17 January 2022

Foreign exchange market, exchange rate developments, and international reserves 2021

The króna appreciated by 2.5% in 2021, and turnover in the interbank foreign currency market contracted by 12% year-on-year. The impact of the COVID-19 pandemic could be felt in the foreign exchange market during the year. The Central Bank conducted transactions in the foreign exchange market in order to mitigate volatility as it deemed warranted, and to improve price formation in the market, albeit to a much lesser degree than in the previous year. The Bank both bought and sold currency in 2021, and its net foreign currency sales for the year totalled 22.7 b.kr. In April 2021, the Bank discontinued the regular currency sales programme it had begun in September 2020, as the currency market had become more balanced. The pension funds were large-scale purchasers of foreign currency, and foreign investors continued to sell domestic securities. The entry into force at mid-year of the new Foreign Exchange Act marked an important milestone, as it expanded authorisations for derivatives trading, among other provisions. The new Act abolished the last of the capital controls introduced in November 2008. At the year-end, the Bank’s international reserves totalled 923.1 b.kr., or 30% of GDP.

See the press release no. 4/2022 on foreign exchange market, exchange rate developments, and international reserves 2021.