Króna Strengthens as Corona Wanes Skip to content

Króna Strengthens as Corona Wanes

By Yelena

Why is Iceland so expensive?

The Icelandic króna has risen in value against the Euro this summer and in fact has been strengthening against the Euro since the beginning of this year, RÚV reports. At the start of 2021, one euro cost ISK 157, while now it costs ISK 147.

According to Daníel Svavarsson, director of Landsbanki’s Economics Department, the foreign exchange market is extremely driven by expectations and the boom at the beginning of the year was largely based on what could be called vaccination optimism. In recent weeks, investments related to the large share offerings of Íslandsbanki and the airline PLAY have also made an impact.

“The biggest reason is the success of vaccinations and the fact that the pandemic has been steadily declining, which has increased optimism in the tourism industry,” says Daníel. “In recent weeks, the main forces have been linked to the flow of foreign investors into the stock market.”

Asked whether he expects the Central Bank to respond to the increased appreciation of the króna, Daníel says he does not foresee that the bank will fix the exchange rate to a certain value. “On the other hand, the Central Bank has been very active in the market in coming in and evening out fluctuations, whether strengthening or weakening.”

Daníel expects the króna to continue appreciating in the near future, though he warns it can always fluctuate in both directions in the short term. “Looking ahead to the next six months, I now rather expect it to be on the strengthening side. Given the current situation and the good performance of the tourism industry, where the resurrection has been faster than people dared to hope, I now rather expect it to continue to be relatively strong.”

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