Icelandic Króna Weakening Again

The exchange rate of the Icelandic króna (ISK) against larger currencies is weakening, casting a shadow on upcoming collective bargaining negotiations and prompting concerns about inflation from the Central Bank.

Kjarninn reports that the going exchange rate for ISK to the euro went from 120 ISK in March to 135 ISK today. At the same time, the price of one US dollar went from 99 ISK to 117 ISK.

The drop continues a trend which has been ongoing for a greater part of this year.

The exchange rate is important in the domestic market as well. While inflation in Iceland is currently at 2.7%, an historic low, the Central Bank is aiming to keep inflation at or below 2.5%. This is especially the case as the largest labour unions in the country have promised to fight for raising the minimum wage.

The news also affects trade, as numerous major international companies are experiencing a severe hit on the stock market, with losses that these companies may decide to recoup with increased prices. Should that happen, products made by these companies, already set to become more expensive, will be even more expensive as the ISK weakens.