Hagsjá Icelandic FX Market March 217 22 March 217 The euro depreciated in February and dipped to ISK 112. in early March. It has picked up since and stood at ISK 118.1 on 2 March, as compared with ISK 119.1 at year-end 216. The ISK weakened somewhat on Monday morning, 13 March, following the announcement on the weekend about the abolition of capital controls. The Central Bank of Iceland (CBI) intervened later that day, selling a total of EUR 12 m (ISK 1.4 bn). 21.3.217 MTD YTD EUR 118.1 4.3% -.8% USD 19.2 2.% -3. GBP 136.1 2.7% -2.3% DKK 1.9 4.3% -.8% SEK 12.9 1.% -1.1% NOK 12.4.%. CHF 19.9 3.3% -1.% JPY.97 2.3%.3% Source: Thomson Reuter Eikon This is the first time since November 214 that the CBI is net seller of EUR on the FX interbank market. The ISK has fluctuated considerably more against the EUR since the beginning of the year. Fluctuations in the ISK exchange rate can be expected to be more pronounced going forward than in recent years. Travellers through Leifsstöð International Airport increased by 47.3% in February between years. There was an ISK 7.6 bn surplus of the payment card balance this month. The real exchange rate in terms of price levels decreased by 6.8% MoM in February. As a result, the 12M increase of the real exchange rate is 11.7%. ISK/EUR and ISK/USD exchange rate 14 13 13 12 12 11 11 1 1 1.7.216 1.9.216 1.11.216 1.1.217 1.3.217 Last date 2 March 217. 1 Landsbankinn hf.
Volatility - 6 day moving average Jan 2 = 1 1 Jan 216 = 1 The British pound has decreased most among Iceland's main trading partner currencies. The CBI represents 3% of total turnover on the FX market in March to date. 1 1 9 9 8 8 7 7 6 1.1.16 1.4.16 1.7.16 1.1.16 1.1.17 EUR USD GBP NOK SEK TWI 1 8% 9 7% 8 6% 7 6 % 4 3% 3 2 1 1% % 21 216 217 Of which CBI Other CBI's share (r-axis) Last date 2 March 217 Source: Thomson Reuters Datastream Net currency purchases by the CBI from the beginning of 214 amount to ISK 8 bn. First 14 days of March The 12M increase in the real exchange rate in February is 11.7%. 1, 8 6 1 8 3% 4 2 6 4 1% -2 214 21 216 217 Gross official reserves Accumulated purchace Non-leveraged reserves *) 2 % -1% 213 214 21 216 217 *) Foreign currency reserves less debt owed by the CBI and the national treasury in foreign currencies., GDM YoY change (r.axis) Real exchange rate Volatility in the ISK has increased since the beginning of the year. 16% 1 1 1% 8% 6% % 21 216 217 EUR/ISK EUR/NOK EUR/SEK Last date 16 March 217, Economic Research's calculations 2 The FX market 22 March 217 Landsbankinn hf.
ISK billions YoY changes 149, foreign travellers departed from the country in February, which is a 47% increase YoY. 1% 8% There was an ISK 7.6 bn surplus on the payment card balance 3 3 6% % - 2 2 1 1-29 211 213 21 217 Number of foreign visitors Source: The Icelandic Tourist Board. 12M Moving average The current account surplus amounted to ISK 194 bn last year. 3 3 2 2 1 1 - -1-1 114 8 121 213 214 21 216 Secondary income, net Balance on services Current account 194 Balance on primary income Balance on goods - 214 21 216 217 Payment card balance of payment Foreign cards in Iceland Domestic cards abroad Both Economic Research and the CBI expect a current account surplus in coming years. 18 16 14 12 1 8 6 4 2 76 12 8 66 12 76 47 217 218 219 Landsbanki (Nov 216 forecast) CBI (Feb 217 forecast) Forecast current account balance., Landsbankinn Economic Research 1 CBI (Nov 216 forecast) According to preliminary figures, the foreign trade deficit amounted to ISK 1.9 bn in February. Iceland's foreign assets in excess of foreign liabilities amount to ISK 26 bn. 1 1 - -1-1 -2-2 214 21 216 217 Preliminary figures Thereof ships and aircraft Excl. ships and aircraft Trade in goods balance Source: Statistics Iceland 2-2 -4-6 -8-1, -1,2-113 -1,4 213 214 21 216 Net International Investment Position IIP excluding DMBs undergoing winding up Estimated underlying IIP, Economic Research s calculations +26 3 The FX market 22 March 217 Landsbankinn hf.
Q4 21 Q1 216 Q2 216 Q3 216 Q4 216 Q4 21 Q1 216 Q2 216 Q3 216 Q4 216 Q4 21 Q1 216 Q2 216 Q3 216 Q4 216 bid yield EUR/ISK interest rate differential The net interest differential against the EUR lies between and 6 percentage points. Adjusted for the CBI's currency auctions and Treasury note maturities, there has been little change to nonresident holdings of Treasury notes. 8% 2 4 7% 6% 2 2 % 1 3% 1-2 -4 1% % 21 216 217 6M Y 1Y Last date 2 March 217 21 216 217 Source: GDM MoM change (r.axis) Foreign ownership of Treasury bonds Adjusted for currency auctions and maturities -6 Arion Bank, Íslandsbanki and Landsbankinn net currency positons are close to neutral. 3 3 2 2 1 1 Yields on EUR -denominated Treasury notes have fallen. % 3% 1% - % 21 216 217 Arion Íslandsbanki Landsbankinn Source: Financial statements of relevant financial undertaking EUR 2.% 1 Jul 22 USD.87% 11 May 222 Last date 2 March 217 4 The FX market 22 March 217 Landsbankinn hf.
The contents and form of this document were produced by employees of Landsbankinn Economic Research (hagfraedideild@landsbankinn.is) and are based on information available to the public when the analysis was compiled. Assessment of this information reflects the views of Economic Research s employees on the analysis date, which may change without notice. Neither Landsbankinn hf. nor its personnel can be held responsible for transactions based on the information and opinions expressed here as the content is not provided as personal advice on individual transactions. Attention should be drawn to the fact that Landsbankinn hf. may, at any time, have direct or indirect interests at stake either on its own behalf or through its subsidiaries or customers, for instance as an investor, creditor or service provider. Nonetheless, all analyses are prepared independently by Landsbankinn Economic Research and in accordance with the bank s rules on separation of activities accessible on the Landsbankinn website. The FX market 22 March 217 Landsbankinn hf.