Currency Rate of the Icelandic Króna Unclear Skip to content

Currency Rate of the Icelandic Króna Unclear

Great uncertainty surrounds the accurate currency rate of the Icelandic króna, despite the Central Bank’s decision yesterday to lock the currency at ISK 131 compared to EUR 1. The króna fluctuated considerably yesterday.

Those who traded with Icelandic banks yesterday received around ISK 150 for every euro. In foreign markets the currency rate of the króna was everything between 200 and 350 compared to EUR 1, Morgunbladid reports.

The Icelandic credit card companies were equally unsure on how much EUR 1 cost in Icelandic krónur and traded ISK 225 for one euro.

Lars Christensen, an expert on Icelandic financial matters at Danske Bank, told Vidskiptabladid that the Central Bank’s decision to lock the currency rate of the ISK is not credible and he finds it unlikely that the exchange rate index can remain at 175 points, as the Central Bank has decided, according to which EUR 1 is ISK 131.

Christensen points out that Iceland’s currency reserves is less than USD 3 billion (EUR 2 billion) and in his opinion a believable strategy aiming at regaining balance would have been necessary in order to make the locked currency rate of the ISK credible.

Christensen also stated that although Iceland’s Prime Minister Geir H. Haarde has announced that it is likely that Russia will grant Iceland a EUR 4 billion (ESD 5 billion) loan, it is not at all certain and not especially probable in his opinion.

Chairman of the Central Bank’s board of directors Davíd Oddsson said yesterday after news of the loan had been released to the media, that the bank had made an overstatement by saying that the loan had been granted, discussions are still ongoing but Russia is positive towards granting Iceland the EUR 4 billion loan.

According to Christensen the Icelandic government is not capable of solving the economic crisis and should look towards the International Monetary Fund (IMF) or the other Nordic countries for help. Norway has already announced that they are prepared to discuss a solution on the problem with Iceland.

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