11 June 2014

Central Bank resumes regular foreign currency purchases

The Central Bank has decided to reinstate a programme of regular purchases of foreign currency in the interbank foreign exchange market, similar to the one in place during the period 31 August 2010 through year-end 2012. At the beginning of that period, the Bank bought 500 thousand euros per week from each market maker in the market, and later it stepped up its purchases to 1 million euros per week from each market maker. The Bank bought a total of 216 million euros (the equivalent of 33.3 b.kr.) under this programme. 

The Central Bank discontinued its regular purchase programme at year-end 2012. Since mid-May 2013, the Bank has been more active in the foreign exchange market than it was previously, intervening in the market with the aim of mitigating exchange rate volatility. That policy will remain in place despite the resumption of regular foreign currency purchases. From 15 May 2013 until the present date, the Bank has bought 288 million euros (45.1 b.kr.) and sold 21 million euros (3.4 b.kr.), for a net purchase amount of 41.7 b.kr. So far in 2014, the Bank’s net purchases have totalled 222 million euros, or 34.5 b.kr. The Central Bank has therefore bought an average of just over 9 million euros per week this year. 

From now until end-September, the Bank intends to purchase 3 million euros per week in the foreign exchange market. The purchases will take place on Tuesdays, right after the market opens. If a holiday falls on a Tuesday, the purchases will take place on the business day immediately following. The first such purchase will take place on Wednesday 18 June 2014. 

The amount purchased according to this programme will be re-evaluated in the autumn, or earlier if circumstances warrant it. This decision has been taken in view of the sizeable foreign currency inflows in recent months and the prospect of continued strong inflows in the months to come, as well as developments in inflation and the rise in the real exchange rate of the króna over the past few years.

Further information can be obtained from Már Guðmundsson, Governor of the Central Bank of Iceland, at tel: +354 569 9600.


No. 18/2014
11 June 2014