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Rating Downgrades Drop Icelandic Krona

October 2, 2008 at 15:19 by Andriy Moraru

Icelandic kronaThe Icelandic krona declined to the lowest level in almost seven years against the U.S. dollar yesterday after the rating downgrades by S&P and Fitch rating agencies raised the risk-averting mood among the investors.

The drop in this national currency reached more than 17 percent this week after the central bank pledged to nationalize the century-old Glitnir Bank as it failed to pay by its short-term debts. Investors believe that the central bank won’t be able to help all the banks and the country will face a strong financial crisis.

The USD/ISK is rising for the sixth day in a row now — the longest rally in more than 3 months. Traders lose confidence in the financial system, the Central Bank of Iceland and its ability to resist crisis. That plays against the krona’s value.

USD/ISK rose from 108.16 to 111.29 as of 13:12 GMT today. It reached 111.51 rate yesterday — the highest rate since November 2001 after closing at 94.35 at the last week’s trading session.

If you have any questions, comments or opinions regarding the Icelandic Krona, feel free to post them using the commentary form below.

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