The value of Norway’s currency, the krone, has taken a dive just during the past 24 hours. The US dollar in particular has become much more expensive, in relative terms, and both economists and analysts are having trouble explaining why.
“What’s happening?” asked the chief economist at Nordea Markets, Kjetil Olsen, in his report on Friday. He wrote that he and his colleagues couldn’t find any clarification other than speculation that it was related to one or more large commercial transactions “that had to be done.”
Olsen later told newspaper Dagens Næringsliv (DN) that “there are no fundamental reasons for the weakening. We don’t know if it’s because of any commercial transactions, but when there isn’t any other news that could cause the krone to lose value, it can be because someone had to do a deal with it.”
The krone had strengthened in recent weeks and months, and has traded against the US dollar recently at below NOK 8, even as low as NOK 7.80. By midday on Friday, though, it cost NOK 8.17 to buy one US dollar, and by 2:30pm a dollar suddenly cost nearly NOK 8.22.
That’s a big change and the krone has also slumped in recent days against the euro, which cost NOK 9.54 at mid-afternoon on Friday. DN noted how that’s occurred even though the euro itself has weakened against several other major currencies, following warnings that negative interest rates would continue for some time to come.
Norway’s central bank kept its own key policy rate steady on Thursday, at 0.5 percent, where it’s been since early 2016. Analysts don’t think that had, or should have had, any major effect on the value of the krone.
DN reported, however, that Halfdan Grangård, chief economist at Handelsbanken Capital Markets, and Niels Kristian Knudsen, Handelsbanken’s currency exchange strategist, noted that Norway’s key economic indicators haven’t met market expectations recently. Oil prices have risen, which usually sends the krone up, but there may be worries over the downturn in the housng market, they noted. A new high for the main index of the Oslo Stock Exchange could also prompt sales of the krone by foreign traders.
Norwegian exporters, meanwhile, are happy with a weaker kroner that helps make their prices more competitive. Norway’s tourism industry also likes a weaker krone because then Norway isn’t quite as expensive for foreign tourists, especially, in this case, Americans and Europeans.
Nordea Markets, DNB Markets and Danske Bank have all forecast a stronger krone next year. “We may need to wait a while longer,” Nordea Markets’ analysts wrote in their update, “but we see good arguments that the krone can strengthen in the longer term.”
newsinenglish.no/Nina Berglund
