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Analyst: – The fact that the Norwegian krone has weakened is a bit of a mystery

During Easter, the crown rose to its highest level since November last year. According to analysts, seasonal fluctuations, faster interest rate notifications are rising from Norges Bank, and the oil price, which rose 35 percent this year, has helped to strengthen the koruna.

In particular, oil price growth led by analyst Nordea Markets, Joachim Bernhardsen, to anticipate further appreciation of the koruna.

– In the next few days, the crown is higher when the market returns from Easter, he wrote in the report Tuesday this week.

This should not be the case. Instead, we weakened about ten cents. On Friday afternoon, the euro was around NOK 9.65.


This is not the first time that analysts have badly predicted the koruna's exchange rate. Over the past few years, analysts have predicted the appreciation of the koruna on several occasions, but the koruna may seem to have joined a historically weak level.

This causes analysts to scratch their heads.

"The fact that the Norwegian krone has weakened so much in the past week, despite rising oil prices, a relatively good stock exchange mood and, last but not least, the fact that the euro has also weakened its good trade against the dollar, is a mystery," writes currency analyst Ingvild Borgen Gjerde. DNB Markets on Friday morning news.

The price of oil is very important for the koruna's exchange rate. When oil prices rise, the Norwegian economy is doing better, causing the central bank to set interest rates. Increased interest rates in Norway contribute to more foreign investors putting their money into Norwegian fixed income securities. This provides increased demand for Norwegian kroner, which in turn leads to a stronger koruna exchange rate.

Starts an explanation

This week, the price of oil has risen above $ 75 but has still weakened the crown. According to Borgen Gjerde, this is related to the weakening of the Swedish crown, which we saw after the meeting of the central bank's interest rates earlier this week.

– As often happened, the weakness of the Swedish crown spread to the Norwegian crown, writes Gjerde.

The strong currency devaluation for our neighboring country came after the central bank lowered its forecast for a key political rate ahead.

However, Gjerde believes it is a mystery that the Norwegian krone has weakened so much in the past week. She highlights another possible explanation:

– The currencies that most weaken are those where investors see the greatest potential for "duete" surprises from central banks, he writes.

The "duet" surprise in this context means that the central bank is surprised that the interest rate will increase less than the market expected.

Central bank upstream

He points out that the currencies they recently strengthened are US dollars and Japanese yen. It is hardly possible for the Japanese central bank to surprise the market with lower interest rates because their monetary policy is already extreme.

The US central bank has already cut its interest rate forecasts this year, and it seems less likely to lower it, says Borg Gjerde.

– Norges Bank, on the other hand, is one of the few central banks to move against this year, which, in the wake of interest rate increases in March, really surprised the market by further cutting its interest rate. As Norway is a small open economy that is threatened by what is happening in the rest of the world, investors believe that Norway is now among the countries where the central bank's potential for "bad" surprises is large, the analyst writes.

He further explains that when other central banks, like Swedish, lower interest rate forecasts, the market expects the Norwegian central bank to follow.

– This may explain the weakness of the Norwegian crown, which is otherwise not underpinned by basic conditions, concludes. (conditions)Copyright Dagens Næringsliv AS and / or our suppliers. We would like to inform you about our cases using a link that leads directly to our site. Copying or other forms of use of all or part of the Content may be made only upon written permission or as permitted by law. You can find more terms here.

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