Iceland Ctrl Bank Stops Tdg Krona At Different Rate Than Mkt

Iceland Ctrl Bank Stops Tdg Krona At Different Rate Than Mkt

STOCKHOLM (Dow Jones)--Iceland's central bank Wednesday said it will no longer carry out foreign currency trading at a different exchange rate than on the foreign exchange market.

"For the past two days, the Central Bank of Iceland has carried out foreign currency trading at a different exchange rate than that on the foreign exchange market," the central bank said in a statement.

The central bank Tuesday pegged the Icelandic krona to a basket of currencies in a move to stabilize the price stability for Iceland's crisis-stricken economy.

The peg gave a euro/krona exchange rate of 131.

Foreign exchange markets, however, continued to trade the krona at a much weaker rate on worries that Iceland couldn't support the exchange rate with a limited amount of currency reserves.

The central bank's statement Wednesday proves market concern was justified.

"It is clear that there is insufficient support for this exchange rate; therefore, the Bank will not make any further such efforts for the time being," the central bank said Wednesday.

At 1400 GMT, one euro cost ISK204.878.

Bank Web site: www.sedlabanki.is

-By Joel Sherwood, Dow Jones Newswires, +46 85 45 13 092, [email protected]

(END) Dow Jones Newswires

October 08, 2008 10:22 ET (14:22 GMT)


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