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The Central Bank bought ISK for 9 million EUR today Featured

The Central Bank of Iceland bought Icelandic krona's (ISK) today for 9 million EUR in three transactions. The CBI is reacting to the depreciation of the krona in January. The CBI also bought ISK last December 31st and then the krona appreciated 1.5%.

The krona appreciated 1.7% today because of the CBI's invervention and this could be largest change of the exchange rate, in one day, since 2009.

Mr. Hafteinn Hauksson, an analyst at Arion bank, said: "What we are mainly pondering about is that it is not clear what the srategy is and what the bank is thinking, if the bank is willing to support the exchange rate with further interventions anytime soon."

"If money continues to flow out of the economy and the Central Bank intends to get involved on the market to support the exchange rate then that will come down on our foreign exchange reserves" he added.

Mr. Hauksson says that the CBI should have better oversight over those who are buying foreign currency for payments of foreign loans and how much foreign currency they have accumulated. "So if the CBI thinks that the outlfow is getting less or is slowing down then this is a positive action" Mr. Hauksson said.

The Central Bank is sending a positive message to the market, but the CBI should keep the market better informed. The CBI says that transactions on the interbank market are reported with a two day delay. The CBI follows a policy that dampens exchange rate swings by interventions on the currency market.

 

Source: Visir.is

http://visir.is/gridarlegt-inngrip-sedlabankans-a-gjaldeyrismarkadi-/article/2013130139839

Last modified on Thursday, 31 January 2013 15:52

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