The Central Bank of Iceland has revised the currency weights in the basket that the Bank uses to calculate the exchange rate index of the króna. Weights are determined on the basis of Iceland’s external trade in 2004. The last revision was made in July 2004. Revised currency weights and the changes from the previous weights are shown in the accompanying table. The revised basket will be used to calculate changes in the exchange rate index after fixing of the exchange rates on Monday, July 11, 2005 until the next review at a similar time next year.

The weights are determined on the basis of the composition of Iceland’s external trade during the previous year. The aim is for the basket to reflect as closely as possible the composition of Iceland’s external trade in goods and services. Main changes from the previous basket are that the weight of the US dollar has increased by 1.19 percentage points and the weight of the euro has decreased by 1.23 percentage points. The increased weight of the dollar is mainly explained by its larger share in service imports. The decrease in the weight of the euro is largely due to a lower level of service imports.