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Local Norway
24-03-2025
- Business
- Local Norway
Interest rate uncertainty boosts Norway's weak krone
Norway's krone has weakened against the dollar, euro, pound and most other major currencies over the past few years. However, it has begun to increase in strength recently. On Monday, a euro traded for 11.36 kroner, the strongest Norwegian krone has been against the euro since June 2024. Meanwhile, the krone was at the strongest it has been against the US dollar since September 2024. Analysts have linked the krone's strengthening against the dollar to uncertainty around growth in the US, and fears of a tariff war between the US. However, economists also believe some of the strengthening is due to uncertainty with the key policy rate in Norway. Higher than forecast inflation figures for February have cast doubt on whether interest rates could be lowered on Thursday, March 27th, by the central bank. 'The fact that the krone has strengthened even more, especially against the euro, is probably due to the fact that the market does not expect any significant interest rate cuts anytime soon. No cut has been priced in before September,' currency strategist Sara Midtgaard at Nordea Markets told business and financial site E24 . Furthermore, the krone could continue to strengthen further if the central bank presents a new interest rate path on Thursday, she said. Norway had been using interest rate increases to curb inflation and prevent the economy from overheating. Between 2021 and 2023, the key policy rate rose from 0 percent to 4.75 percent. The central bank had set a rough inflation target of two percent, and earlier this year said that a cut was likely to arrive in March. However, the country's Consumer Price Index was measured at 3.6 percent between February 2024 and the same month this year. Advertisement Since then, economists have warned that inflation figures could mean that any key interest rate cuts would be unlikely to arrive until the autumn or winter. Higher interest rates are good for the Norwegian krone as they make the currency more attractive for investors, which is why the currency has been boosted by uncertainty surrounding the key policy rate. In the longer term, analysts believe that Norway's krone could continue to strengthen. Bank HSBC recently wrote that the factors that had pushed down the Norwegian krone in recent years had stabilised. READ ALSO: Analysts predict Norway's krone could make up lost ground on the euro and US dollar Midtgaard said tax cuts in the US could actually mean the US dollar strengthens against the krone in the short term, but in the longer term, the krone could continue to strengthen against the euro and dollar beyond 2026.
Local Norway
12-03-2025
- Business
- Local Norway
Analysts predict Norway's krone could make up lost ground on the euro and US dollar
Bank HSBC believes the Norwegian krone is poised to recover some of its losses 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. She added that some of the factors that pushed the krone down in recent years had stabilised. 'Therefore, we believe that the potential for a recovery for the Norwegian krone should not be overlooked, and we expect the krone to rise [against the Swedish krona] in the coming months,' she said. Ivar Strompdal, a former fund manager, told the business and financial paper Dagens Næringsliv that the krone could pick up against the dollar and the euro in the coming years. He said increased spending in Europe and the United States would give smaller currencies a chance to make a recovery. 'The foreign exchange market is the world's most efficient market. Trying to make quick profits there will quickly lead you down a wild path, and it is almost impossible to predict exchange rates for the near future. But in the longer term, I believe the Norwegian krone will strengthen,' Strompdal said. Stompdal predicted that one euro could cost less than ten kroner in the next few years. However, he admitted that not many may agree with this outlook. Interest rate and currency strategist Dane Cekov at Sparebank 1 Markets said he was sceptical about whether the krone could strengthen significantly against the euro this year. 'We see more downside for oil and gas prices in Europe, and that is negative for the krone. For the euro, however, lower gas prices are positive. The economic packages in the EU and Germany on defence and investments can kickstart better growth development in the euro area and provide less need for low interest rates there. Better development in Europe indicates a stronger euro and less downside possibility for the euro to fall over time,' he said. Although he did say he could see the possibility of the Norwegian krone gaining ground on the US dollar. 'I also became more pessimistic about the krone after Trump won the US election. At the same time, we now see that Trump is doing more harm to the dollar than good with his policies,' Cekov said. 'This will probably continue. A further weakening of the dollar could help more risk-sensitive currencies, such as the krone. Other smaller currencies, such as the Swedish krona, are not as energy-dependent and will probably perform better,' he added.
