Why Norway's krone has strengthened against the US dollar
The Norwegian krone has made a strong recovery from
a recent slump against the US dollar
. A dollar was trading for 10.52 kroner on Tuesday, compared to 11.47 kroner in January.
Norwegian economists have pointed to two reasons why the krone has made up ground on the dollar. Firstly, the dollar has weakened due to uncertainty surrounding growth in the US. Secondly, fears of
a tariff war
between Europe and the US have created uncertainty and strengthened the krone against the dollar and the euro.
Chief economist at Eika Gruppen, Jan Ludvig Andreassen, said that the Norwegian krone looked attractive to investors as it currently appeared that Norway wouldn't be hit as hard as other countries when it came to tariffs.
'It looks very reliable that you put money in Norwegian kroner if you are in Singapore, Dubai or Tokyo,' he told Norwegian business and financial site
E24
.
Furthermore,
higher-than-forecast inflation figures
have led to a higher forecasted interest rate path.
As a result, a number of economists have predicted that the planned interest rate cut in March will be postponed and that there would be between two to three cuts in Norway in 2025.
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This makes the Norwegian krone a lot more attractive to investors and boosts Norway's currency.
'It moves us into a category where interest rates will be higher for longer. That you can hold a little more kroner relative to other currencies,' Nils Kristian Knudsen, interest rate and currency strategist at Handelsbanken, told E24.
Bank HSBC recently forecasted that the Norwegian krone was poised to recover some ground on the euro and US dollar following a turbulent few years in which it has struggled against most major currencies.
'We believe the balance of risks is now shifting towards a recovery for the Norwegian krone,' Charlotte Ong, European currency strategist at HSBC, said.
Other analysts also forecasted the Norwegian krone increasing against the dollar in the medium and longer term.
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Analysts predict Norway's krone could make up lost ground on the euro and US dollar
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