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Iceland may peg krona to another currency amid fears of economy overheating

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Iceland may peg krona to another currency amid fears of economy overheating

Iceland would examine options to peg Iceland's krona to another currency, most probably the euro or pound, in a bid to stabilize the currency, Finance Minister Benedikt Johannesson told the Financial Times.

The plans come just days after Iceland lifted the final set of capital restrictions imposed following its near collapse in the 2008 global financial crisis and amid fears about the country's economy overheating, the newspaper reported.

Johannesson said the currency fluctuated by 10% in the two months since the government took over as the country's high interest rates attracted foreign buyers.

The Icelandic economy has grown strongly, due to tourism and domestic demand, which reached 11% in the fourth quarter of 2016, according to the FT. In addition, current accounts are in surplus and debt is falling, with the government eyeing an increase in the valued added tax for tourism in 2018.