In the two charts below I have combined the Index annual returns in USD and ISK. Each diamond shows the return in USD on the horizontal axis and in ISK on the vertical axis. Thus a diamond above the horizontal line is a positive return in ISK. The blue diamond shows the most recent year (2023). Starting with total returns, we have 22 diamonds in the upper right quadrant, which refers to years with positive return in the Index, both in USD and ISK. Within that area, the diamonds above the angled orange linear regression line show years where an increase in the USDISK rate improves the Index returns in ISK.

For instance, the World Index produced a return of about 24% in USD terms in 1988. However, the 32% rise in the US dollar versus the ISK that year boosted the Index return in kronas – resulting in 61% return and the highest return in ISK seen in this 36 year period. The collapse of the Icelandic krona in 2008, resulting in a 95% appreciation of the USDISK rate that year, offsets the +40% negative return in the Index in US$ and generated a 16%+ positive return in kronas.  

We only have seven years where the return in ISK is below the horizontal line and thus negative. Four of them show a relatively “mild” negative return and one year is about -10%. Two years, 1990 and 2002, show drastic negative returns of 24% and 37%. In the latter year, the Index produced a negative 20% return in USD and the USD declined 21.7% against the ISK. Therefore, the decline in the US dollar made the performance even worse.

So currency matters, at least in the short run!

Here is the chart for the price returns.