From Iceland — Iceland's Central Bank Trying To Strengthen Weakening Krona

Iceland’s Central Bank Trying To Strengthen Weakening Krona

Published January 9, 2019

Andie Sophia Fontaine
Photo by
Art Bicnick

The Central Bank has, for three days in a row now, actively bought Icelandic krónur in an effort to stem its weakening value. The matter was first brought to light by Kjarninn from an unnamed source, and was later confirmed by the Central Bank with RÚV.

According to Kjarninn’s source, the weakening of the króna can be largely attributed to Eaton Vance Mana­gement, an American investment company with partial to majority ownership of several Icelandic companies.

For example, Eaton have bought up shares in the insurance company VÍS, becoming the second biggest shareholder of that company in June 2017, and bought shares in both the real estate company Reitir, the retail company Hagar, and bought a 10% stake in Icelandic telecom Síminn. Eaton Vance also owns billions of ISK in government bonds, most of it offshore.

Eaton is reportedly selling off large portions of its Icelandic holdings, in particular stocks and bonds, effectively dumping large amounts of króna on the market. This has in turn prompted the Central Bank to buy back krónur.

While the Central Bank typically does not disclose its financial activities until two days have passed since any given transaction, RÚV reports that they bought 806 million krónur last Friday.

The króna has been weakening for quite some time now. It weakened by 0.67% against the euro and 0.87% against the US dollar yesterday, with a euro now costing 136.5 ISK and a US dollar costing about 120 ISK.

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