By Peter Apps

LONDON, Oct 13 (Reuters) - A week after its banking system, economy and currency entered meltdown, Iceland's crown currency <ISK=> is essentially untradeable in international markets, with its true value impossible to calculate.

The crown plunged last week as Iceland was forced to take control of its highly indebted banking sector, whose colossal liabilities are several times its gross domestic product.

According to Reuters data, the crown lost half its value between October 3-7 against the euro. Relative to the crown, the euro has tripled in value since the beginning of the year.

"It is now impossible to work out its value," said Dresdner Kleinwort foreign exchange strategist Jon Harrison. "You can't get prices from local banks. Obviously, eventually it is going to have to be worked out what the value is because there are still contracts in crowns as well as bonds. But for the time being there is nothing."

Iceland briefly said last week it was pegging its currency to the euro, but the peg failed to last 24 hours and analysts said it had insufficient reserves to defend it by buying crowns in the market with dollars or euros.

Europe's largest securities settlement firm, Euroclear Bank, said the currency remains suspended for settlement of securities transactions, with the lack of an exchange rate at the heart of the problem.

"We will make a decision today on whether to continue the status quo or reinstate the currency," Denis Peters, a director at the bank, told Reuters in a telephone interview.

The crown could still be exchanged through Euroclear for other foreign currencies, he said, but only if an exchange rate could be found or the two parties in an exchange could agree an exchange rate between themselves.

TIGHT RESTRICTIONS

The last time a currency was suspended under similar circumstances was during problems with the Thai baht several years ago, he said. No Western European currency had seen such a suspension in recent memory.

With its foreign currency reserves are seen as totally inadequate to cover the losses, Iceland's central bank has imposed tight restrictions on use of foreign currency domestically, also capping Icelandic credit card use overseas.

One Icelander told Reuters it was also very uncertain what exchange rate Icelandic credit cards were now operating in -- or even if they would be accepted overseas.

The bank said on its website that "due to the unusual circumstances currently reigning", certain "temporary modifications" in currency outflow were necessary.

Individuals can now only purchase foreign currency in Iceland on proof of a valid travel ticket overseas, and firms must apply to the Central bank proving they want the money for essential foreign purchases such as food, fuel and medicine.

Another official statement said Iceland's stock market, which had been due to open on Monday, would remain closed until Tuesday.

Analysts say it may be some time before anything approaching normal trade resumes, with the market wanting clarity on any rescue package or bailout deal from the International Monetary Fund or potential "new friend" Russia.

Icelandic politicians are also sounding more positive on membership of the European Union, but analysts doubt joining the euro in a hurry represents a realistic option.

"They would still have to go through the same criteria as everyone else and that would take a long time," said Dresdner's Harrison.

(Editing by Andy Bruce)

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