Iceland’s interest-rate cuts should have slowed gains in its currency (ISK). Instead, the krona is now a world-beater.
The currency has surged 4 percent against the euro and 6.4 percent against the dollar since March 31, taking its gains in the past year to 21 percent and 15 percent, respectively. That’s the biggest advance among global currencies for both periods. Islandsbanki hf sees it rallying a further 2.5 percent to 113 per euro by the final quarter of this year.
The krona’s gains have accelerated as record tourist arrivals, economic growth that exceeded 11 percent in the final quarter of 2016 and western Europe’s highest yields fuel fund inflows. Iceland’s two rate cuts in the second half of last year haven’t eroded the currency’s appeal.
Source: Bloomberg
Junior Trader Ivan Ivanov
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