Abstract
Computer simulations are used to show how diamagnetic impurities induce the formation of 'canted local states' in a triangular lattice of antiferromagnetically coupled XY spins, through relief of the magnetic frustration inherent in the lattice. The canted local states are shown to interact with each other through polarisation of the intervening medium. At low concentration of impurities the exchange energy of some of the remaining moments is found to increase, in contrast to the usual effect of impurities on the exchange energy of the moments in a non-frustrated lattice.