Reykjavík is the capital and largest city of Iceland. Its latitude at 64°08' N makes it the world's northernmost capital of a sovereign state. It is located in southwestern Iceland, on the southern shore of Faxaflói Bay. With a population of around 120,000 it is the heart of Iceland's economic and governmental activity.Reykjavík is believed to be the location of the first permanent settlement in Iceland, which Ingólfur Arnarson is said to have established around 870. Until the 18th century, there was no urban development in the city location.