What is interesting about this is that the market is 115 krona per euro, but the central bank wants 137.5 krona for every euro. Does anyone know why anybody would sell to the central bank at a 20% loss compared to market. And also how could the central bank pay in euros if the currency controls aren't lifted till Tuesday.
When you want to fill a large order that exceeds the liquidity of the market at current prices, you'll have to pay a higher price to find enough sellers. That's probably what was the case here, no?
This is ironic. Last year the Central Bank gave the hedge funds that hold ISK a one time offer to sell their ISK for I think 190 ISK/EUR or else they will be locked in the ISK forever...
Now 9 months later they are trying to settle this by offering them 137 ISK/EUR or about 30% higher price... but the real rate for other owners of ISK is about 115 ISK/EUR the 20% mentioned in the article. This shows how much amateurs the Finance minister of Iceland and the Icelandic Central bank are.
Imagine that you can bully your Central bank like this...