Iceland: Temporary suspension of foreign currency purchases
The Central Bank of Iceland has decided to temporarily suspend its regular purchases of foreign currency from market makers in the foreign exchange market.
Since September 2010, the Central Bank has purchased foreign currency on a weekly basis.
In all, in 2012, the Central Bank bought foreign currency for approximately ISK 20 billion and sold foreign currency for a total of ISK 3 billion in market intervention measures in March and on 31 December.
The Central Bank is of the view that the substantial depreciation of the Icelandic Króna (ISK) in recent weeks has been unwarranted, particularly in view of the fact that it is caused in large part by temporary factors related to financial institutions’ year-end positions.
In addition, outflows related to private sector foreign deleveraging have weakened the currency in recent months.
The Central Bank therefore considers it appropriate to suspend its regular foreign currency purchases on a temporary basis and, when conditions permit, to resume the purchase of sufficient foreign currency in the interbank market to defray the interest expense on the Treasury’s foreign debt. For the longer term, the Central Bank will increase its non-borrowed reserves.
Further information can be obtained from http://www.cb.is/ or http://www.sedlabanki.is/ or from Mr Már Guðmundsson, Governor of the Central Bank of Iceland, at tel: +354 569-9600.
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