REYKJAVIK: Iceland is planning to peg its krona to another currency, possibly the euro or pound sterling, to stabilise its fluctuating exchange rate, its finance minister told the Financial Times on Monday.

The Icelandic currency is booming as a result of the island’s spectacular recovery after the 2008 economic collapse, which forced authorities to nationalise three failing banks and impose capital controls.

When these controls were lifted in March, analysts hoped the krona would depreciate. Instead, a number of factors have driven the currency higher, such as booming tourism, robust consumption and comparatively high interest rates, which are attracting investors. In one year, all foreign currencies have declined against the krona, with sterling falling by 22 percent, the Swedish krona by 16 percent and the euro by 15 percent. One euro is worth about 120.9 kronor at current prices. The rise in krona against the pound or the euro is of particular concern to the fishing sector, which exports almost three quarters of its products to Europe.—AFP