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Is Icelandic Króna Too Strong?

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Is Icelandic Króna Too Strong?

Icelandic money

Photo: Geir Ólafsson.

The strong value of the Icelandic króna has begun to threaten Icelandic companies, and as a result, jobs, Iceland’s Minister of Finance Benedikt Jóhannesson told RÚV earlier this week. The króna is now stronger than it has been in around a decade. Its value has risen continuously in past weeks, contrary to the hopes of many state officials following the lifting of capital controls in March. The US dollar briefly sank to below ISK100 on Friday, but ended the day at 101 ISK.

Benedikt has declared his concerns about the surge of the króna and has considered it necessary to peg it to a foreign currency. Employers have communicated their fears to him regarding the high value of the currency, most recently at a meeting in Siglufjörður last Friday. “There were many people there who are in fisheries or other kinds of export. People are nearly in shock over how strong the króna has become in these recent months, not to mention the past two years.”

“It has happened much more quickly than we had feared,” Benedikt stated, referring to the strengthening of the currency in past months. He said it’s undeniably advantageous that a strong króna has resulted in less expensive imported goods, as well as the ability to travel abroad more economically than before. “At the same time, it is undermining companies and becoming a threat to the employment of numerous individuals. Iceland is not as competitive as it should be and in that sense we are now treading on dangerous terrain.”

The króna weakened in relation to the US dollar, the British pound, and the Euro after the repeal of capital controls was announced in March. That trend continued until April 4. Since then, the króna has strengthened considerably: the US dollar costs ISK 14 less than a month and a half ago, the British pound is ISK 12 cheaper and the price of the Euro has gone down by ISK 10.

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