Icelandic currency on the rebound

Euro v KronaThe Icelandic krona could rise 8 per cent against the euro during the next few months, says a senior analyst at Bear Stearns investment bank.

Bear Stearns’ chief currency expert, Steve Barrow, believes the krona “has probably fallen enough” and predicts its value will bounce back to around 110 to the euro by July, according to a report in Bloomburg.

At one point the currency experienced a 35 percent fall against the euro since the beginning of 2008 but is now making up with modest gains. Losses against the dollar have been less severe at 12 percent in 12 months.

The experts at Bear Stearns retain their position of authority and the bank itself remains one of the big names on Wall Street, despite its emergency sale to JP Morgan earlier this year. Bear Stearns was a high profile victim of the global credit crunch, largely caused by defaults in the US sub-prime mortgage market.

Bear Stearn’s vocal support for the Icelandic krona will come as a surprise to some analysts. The US bank has been implicated in a possible plot whereby unscrupulous traders allegedly conspired to profit from an artificially induced meltdown of the Icelandic economy. The Icelandic government blames much of the recent negative market coverage on the country on misinformation provided by such investors.

Bear Stearns’s comments echo the sentiments of Icelandic finance minister, Arni Matthiesen, who spoke at a meeting in Hamburg last week. The minister stated that the krona is currently undervalued and that the worst of the crisis might already have passed.