The Central Bank of Iceland has decided to initiate a programme of regular foreign currency purchases in the interbank foreign exchange market. More specifically, the Bank intends to purchase 6 million euros per week in the market. The Bank will buy 3 million euros shortly after the market opening each Tuesday and Thursday, and if the planned transaction date falls on a holiday, the purchase will be made on the business day immediately thereafter. The first purchase will take place on Tuesday 15 April 2025.[1] The Bank will review the purchase programme as circumstances warrant.

The main objectives of the currency purchase programme introduced now are to increase the share of reserves financed in Icelandic krónur and to meet the Treasury’s need for currency. Abundant reserves have played an important role in maintaining stability and enhanced 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 Bank on the Treasury’s behalf. Furthermore, the Bank is of the opinion that conditions are now favourable for introducing such a programme and that the purchases will not materially affect the exchange rate of the króna. 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.

The Bank last engaged in a regular currency transaction programme during the COVID-19 pandemic, when it sold 71 b.kr. worth of currency in regular transactions that reduced the Bank's international reserves commensurably. The international reserves totalled 886 b.kr. at the end of 2024, or 118% of the International Monetary Fund’s (IMF) reserve adequacy metric (RAM).[2] The IMF considers it desirable that the ratio be held between 100% and 150% of the RAM, depending on the structure and status of the domestic economy. The Bank’s current assessment is that the reserves should be about 120% of the RAM.

Press release no. 6/2025

10 April 2025

[1] One purchase will be made during Holy Week for 3 m.euros.

[2] RAM is a metric to assess reserve adequacy defined as: RAM = 5%*EX + 5%*M3 + 30%*STD + 15%*LTD (excl. FDI)