On 15 April 2025, 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. The amount purchased was increased to 12 million euros per week with a press release dated 12 June. The Bank has now decided to scale its purchases back to 6 million euros per week, effective 17 November. 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 currency.
Since April, the Bank has bought currency for the equivalent of 46 b.kr. through its regular interbank market purchases. Over the same period, it has bought currency for 13 b.kr. in accordance with its intervention policy. During the period, the Bank has therefore purchased foreign currency worth ISK 59 billion. At the same time, the króna exchange rate has depreciated by 0.5%. The international reserves now amount to 970 b.kr.
In estimating reserves adequacy, the Bank gives primary consideration to the International Monetary Fund’s (IMF) reserve adequacy metric (RAM).[1] The IMF considers it preferable that the ratio be held between 100% and 150% of the RAM, depending on the characteristics and position of the domestic economy. The Central Bank’s international reserves now measure over 120% of the RAM, and the Bank’s target has been to hold reserves equalling at least 120% of the metric.
As a result, the Bank has decided to reduce the amount of its regular foreign currency purchases. As before, the purchases will be executed shortly after the opening of the market on Tuesdays and Thursdays.
The Central 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. 17/2025
14 November 2025
[1] The RAM is a measure of reserve adequacy. It is defined as follows: RAM = 5%*exports + 5%*M3 + 30%*current liabilities + 15%*long-term liabilities (excluding liabilities relating to foreign direct investment).