Icelandic Currency Is In Troubled Waters
It has to be said that the Icelandic currency has had a dire time of late. Towards the end of 2008 it was virtually shunned in all corners of the world. Icelandic banks which were previously thought of as being nice and safe, turned out to be anything but. The global economic problems didn’t just touch Iceland last year - they fairly hit it full on. Several major banks collapsed and since then there have been many discussions as to what should happen with the economy, and indeed the currency.
The latest idea is that it could be ditched so the Icelanders can adopt the Euro instead. You can read more about this latest development on the UK Reuters website.
This seems to be an interesting proposition on the face of it, but it is also one which is hard to swallow. And the krona has perked up a little of late, which makes the whole situation even more intriguing.
Let’s take the krona and the US dollar. On New Year’s Day this year the US dollar was bagging 121.114 krona to the dollar. This crept up steadily as time went on - 122.834 on the 5th of the month, and then up to 124.433 on the 9th. It then pushed up further to 126.988 on the 13th, before peaking at 129.119 on the 20th.
But just as the first half of the month seemed to say that the Icelandic krona was struggling to maintain any kind of strength at all, things started to tip back in the opposite direction. Suddenly it was the krona that had the upper hand, and the US dollar didn’t have such a good exchange rate to play with after all.
We were down to 127.417 on the 22nd, and 125.363 the very next day. You could see a pattern developing here, and as it turned out we had indeed peaked for the month as a whole.
And things slid back steadily from then on, reaching 113.581 on the 29th and finishing the month only slightly higher on 113.625. That is quite a fall for the US dollar, so it seems that the Icelandic krona is not quite finished yet.
The US wasn’t the only country to have troubles with Iceland though. Great Britain also had its spat, and yet the pound had a similarly bumpy time against the foreign currency. Anyone looking at their currency converter without realising that the Icelandic banks had had such troubles would have thought this was a good time for the krona.
Here’s why. The pound was claiming 176.960 Icelandic krona on the 1st January. And as with the US dollar things went steadily in the pound’s favor. By the 9th the exchange rate was up to 190.293. That’s quite a jump up in just nine days, but that was going to be the high point of the entire month. By the 13th we were back down to 184.824, as if the krona was warning all comers that it wasn’t quite finished with yet.
The pound bounced back to claim 189.607 on the 16th, but after that the familiar downhill pattern we had seen with the US dollar was set in motion. By the end of January the pound was looking at an exchange rate of 162.190 – far lower than it had started the New Year with.
Of course there is more to these figures than meets the eye. Both the US and the UK have got troubles of their own thanks to the current state of the economy. But whether Iceland does eventually decide to abandon the krona in favor of the Euro or not, there is no doubting that many people are still loathe to invest in their currency.
And it’s not surprising either given the debacle that happened towards the end of last year. Would you invest in Icelandic banks now, after all that has happened?
Of course it is easy to point to Iceland and note the problems they have had. But they are far from being the only ones touched by what has gone on. In the end we must all try to ride out the unprecedented events that have happened so far – and continue to happen.
But will the krona still be there at the end of the day?
