The krone is exceptionally weak before Norwegians travel abroad this summer. A dollar costs NOK 10.68, while a euro costs NOK 11.63. Senior economist Dane Cekov believes the krone exchange rate will fluctuate around today’s weak level throughout the summer. – It will be a rollercoaster for the krone exchange rate. It will jump and bounce, says senior economist Dane Cekov at Nordea. – Misunderstands The turbulence will especially come when Norges Bank tells how many kroner they want to sell each day. At the beginning of May, krone sales were cut to 1.4 billion daily. Cekov is unsure whether everyone who bets on where the krone exchange rate will go has understood why Norges Bank is selling krone. Senior economist Dane Cekov at Nordea. – There are some actors abroad who misunderstand this a bit, he says. For Norges Bank, it does not sell kroner to influence the exchange rate, as other central banks can do, but because the state has given the central bank a very special task. Selling and buying kroner after oil money is spent Norges Bank helps the government get hold of kroner that can be used to pay public expenses. The income in the state budget is less than the expenditure, and the politicians cover the deficit with oil money. The state already has a number of kroner that comes from taxes and dividends from the oil and gas sector. But the sum is usually less than the oil money the politicians want to spend. Therefore, Norges Bank has as a rule bought kroner every day to cover the use of oil money. But in the last couple of years, Norges AS has received more kroner from the oil and gas industry than the deficit in the national budget. Therefore, Norges Bank sells the surplus of kroner regularly throughout the year. On Thursday, Finance Minister Trygve Slagsvold told Vedum (Sp) that the use of oil money should be increased. The oil-corrected deficit increases by NOK 44 billion this year. From 1 June, the central bank has 144 trading days to adjust krone sales. INCREASING THE USE OF OIL MONEY: Like finance ministers before Trygve Slagsvold Vedum (Sp), he must take more and more of the Oil Fund to make the state budget go round. Then the central bank must ensure that Vedum has enough kroner for hospitals and municipalities. Photo: NTB Since Vedum will use more of the krone surplus going forward, Cekov has calculated that krone sales can be cut by NOK 300 million to 1.1 billion daily. On the other hand, the government believes that the price of oil and gas will be high, which suggests that more tax kroner should be collected. But Cekov doesn’t count on these kroner. – This is because the state has slightly outdated estimates. We think Norges Bank ignores that, and focuses on the state’s intention to spend more oil kroner, he says. Less krone sales can result in a weaker krone. The question then is how the players in the market react to Norges Bank cutting krone sales. – Higher oil money use and lower krone sales are pulling in the direction of a stronger krone, he says. But Cekov suspects that some people abroad are betting that Norges Bank will reduce krone sales even more than the estimates. In May, for example, the krone exchange rate weakened after the central bank said it would sell less krone. – If the expectation is that krone sales will decrease further, they will get a cold shower and be negatively surprised, he says. Four reasons why the krone has become weaker The krone has been weakened over a long period of time. Senior economist Dane Cekov at Nordea points to four reasons why the krone is considerably weaker today than in 2010. The interest rate differential with other countries is decreasing: Norway no longer has higher interest rates than the eurozone and the USA. Japan and Switzerland are also in the same situation as Norway, but have larger currencies, are considered safe havens and are thus less exposed to fluctuations. Thus, the Norwegian krone is chosen away. Investors take less currency risk: Financial institutions such as banks and funds were subject to regulations after the financial crisis that make it more difficult to invest in risky assets. It can typically be smaller currencies, such as Norwegian kroner. Certain hedge funds have completely stopped owning kroner, according to Cekov. Krone sales when the stock market falls: The krone is weakened when the financial markets fall. Norwegian life and pension funds such as index funds must reflect the value of the stock exchanges they are measured against abroad. These investments must be currency hedged. This means that krone must be bought if the indices rise, while krone must be sold if the stock market falls. Norges Bank sells krone: The krone exchange rate fluctuates with the price of oil and gas, which is Norway’s most important commodity sold abroad. But even though Norway has an enormous trade surplus with other countries, the basic balance does not show a surplus because the central bank sells so many kroner that the effect is almost neutralized. Norges Bank sells NOK 1.4 billion every day. Expect interest rate peak of 4 per cent Most economists point to the difference in interest rates between Norway and other countries as one of the main reasons why the krone has become relatively weaker. – The krona has been a high-interest currency, with slightly higher interest rates than other countries. That is no longer the case, generally speaking, says currency strategist Magne Østnor in DNB Markets. But the krone exchange rate has become stronger since Norges Bank held its interest rate meeting at the beginning of May. Then the central bank gave signals that the weak krone could mean even higher interest rates than previously announced. Both DNB and Nordea believe that interest rates will peak at 4 per cent this autumn, which could therefore give a mortgage interest rate of 5-5.5 per cent. Policy rate in percent The policy rate is set eight times a year by Norges Bank. The policy interest rate governs the interest rates in the banks, and affects your housing costs. The aim of raising the interest rate is for the high prices to come down again. The forecast tells us how Norges Bank thinks interest rates will develop in the future. Read more about sources and reservations here. A higher policy rate means increased expenses if you have a mortgage 2021 2022 2023 2024 2025 2026 Forecast Norges bank Østnor sees several signs that such a cooling is needed in the economy, in relation to Norges Bank’s announced peak of 3.6 per cent interest. – For Norges Bank, many points in the direction of higher interest rates. They went so far as to say that if things continue as they are, there will be a higher interest rate peak than they signaled in March. Then we also got inflation figures that were stronger than expected. Growth in the economy remains slightly on the upside, he says. Interest calculator The calculator uses the formula for annuity loans to calculate your monthly costs. Nominal interest is used here. This means that there will be an additional transaction fee which will vary from bank to bank. Today’s interest rate is taken from DNB’s mortgage interest rate for young people, and different banks will have different interest rates. The figures given here will therefore be approximate for you. Monthly expenses are interest and repayments combined. Read more about sources and reservations here. See how much you have to pay if the interest rate increases.
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– It will be a roller coaster – news Norway – Overview of news from different parts of the country
