Small Exchange: Iceland lifts capital controls, Nigeria’s forex reserves keep climbing, Barbados tourism blamed for foreign exchange leaks

Peter Terlato 13 March 2017 NEWS

International Money cash notes

The week's currency news rounded up.

Iceland lifts capital controls

Over the weekend, the Icelandic government announced it would be introducing new rules on foreign exchange, liberalising capital controls and restrictions for households and businesses.

The Iceland Monitor reports the changes in legislation means foreign exchange transactions, investment, hedging, lending and cross-border movements of domestic and foreign currency will be far less inhibited.

The requirement that residents repatriate foreign currency has also been lifted.

Capital controls were introduced almost a decade ago, in 2008.

The new rules have been published on the Central Bank of Iceland's website.

Nigeria's forex reserves exceed $30 billion

The latest data released by the Central Bank of Nigeria reveals the country's foreign exchange reserves have risen to their highest levels in 18 months.

Reserves have increased steadily at a day-on-day rate of between 2.30% and 2.75% since January 2017, closing the trading week above $US30 billion.

However, this is still nowhere near the peak of $64 billion in August 2008.

On Friday, March 10, the Nigerian Naira crashed against the US Dollar, Pound Sterling and Euro at the parallel market, shortly after President Muhammadu Buhari's return from London.

Last month Nigeria's economic council called for a review of the country's foreign exchange policy and soon after, introduced a new national forex strategy.

Tourism blamed for Barbados' foreign exchange losses

Losses in vital foreign exchange reserves on the sovereign island of Barbados are being attributed to the nation's primary revenue stream, tourism, Barbados Today reports.

Former Central Bank economist and now managing director of Antilles Economics Stacia Howard told a panel discussion last week that while tourists are bringing in foreign exchange, a lot of this money is sent back out by the sector to pay for imported goods and services.

“When we take out loans, especially foreign loans to refurbish our properties, we have to pay back that debt using foreign exchange. So there are a lot of leakages that go out of the country," Howard said.

"You would see that last year we had record numbers of arrivals and our reserves dropped under 12 weeks. Is that the fault of tourism? You did your job - the tourists came - but because the relationship between tourism and the rest of the economy needs strengthening, that is why we don't always reap the rewards that we need to reap."

Each week Small Exchange sums up currency news from around the globe and looks into how it impacts exchange rates and options.

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