In April, the Central Bank of Iceland began a programme of regular foreign currency purchases in the interbank market, buying a total of 6 million euros per week; cf. the Bank’s 10 April 2025 press release. Since the regular purchases began in April, the Bank has bought currency equivalent to 7 b.kr., and the króna has appreciated slightly at the same time. The Bank has now decided to increase the weekly purchase amount to 12 million euros, effective 13 June 2025. The Bank will buy 3 million euros every Tuesday, Wednesday, Thursday, and Friday, shortly after the market opens. As before, the main objective of the currency purchase programme is to increase the domestically financed share of the Bank’s international reserves and to meet the Treasury’s need for foreign currency.
Sizeable reserves have played an important role in maintaining stability and resilience against shocks. The outlook is for the reserves to shrink marginally in the coming term, all else being equal, owing to foreign payments made by the Central Bank on the Treasury’s behalf. Furthermore, the Bank is of the opinion that conditions are now favourable for expanding the programme and that the purchases will not materially affect the exchange rate of the króna. The Bank will reassess the currency purchases as needed.
The international reserves totalled 865 b.kr. at the end of Q1/2025, or 116% of the International Monetary Fund’s (IMF) reserve adequacy metric. By mid-June, they had increased to 895 b.kr. The Central Bank aims to maintain the reserves at a minimum of 120% of the adequacy metric at all times. [1]
The Bank will continue its policy of intervening in the foreign exchange market as it deems necessary to mitigate short-term exchange rate volatility.
Press release no. 10/2025
12 June 2025
[1] The measure of reserve adequacy. It is defined as follows: 5%*exports + 5%*M3 + 30%*current liabilities + 15%*long-term liabilities (excluding liabilities relating to foreign direct investment).