The Norwegian krone has weakened by around 20 per cent against the dollar and euro in a year. The krone is now at record low levels. You get much less for your holiday money abroad when the euro costs NOK 11 and 70 and the dollar costs NOK 10 and 80. But if we are to believe currency analysts in Europe’s financial capital London, the bottom has now been reached for the krone exchange rate. And it will strengthen. – The Norwegian krone is undervalued Francesco Pesole, currency analyst at the major bank ING’s London office, believes the Norwegian krone will strengthen towards the end of the year. Then the American central bank will cut interest rates, and the whole of Europe will be seen as more attractive to invest in than the USA. Francesco Pesole, who is a currency analyst at the major bank ING’s London office, believes that the Norwegian krone is undervalued. Photo: Gry Blekastad Almås / news – The Norwegian krone is really undervalued. There are great opportunities for it to recover. The pick-up can happen quickly, says Pesole. The experienced currency strategist Kit Juckes, who works in the London office of the major French bank Societe Generale, believes that the strengthening of the krone will come next year. – The euro is now at the highest levels measured against Norwegian kroner. This will change when the European Central Bank, ECB, is done with the interest rate increases according to Juckes. Kit Juckes, currency analyst at the major French bank Societe Generale in London. Photo: Gry Blekastad Almås / news The Eurozone now has a policy rate of 3.5 per cent, while Norges Bank raised it to 3.25 per cent at its May meeting. He also believes that the situation will change dramatically when the war in Ukraine ends. Heated debate The Krones recovery has started a heated debate in Norway. One of those who point to political risk in Norway as an explanation for the low krone exchange rate is financier Øystein Stray Spetalen, who has said that foreign countries see Norway as politically unstable. – Buying currency is buying future earnings in a country. In Norway, there is discussion about closing the oil business, and the long-term view of Norway is becoming dangerous, Spetalen told news recently. Others point to the government’s sudden decision to impose a 40 per cent rent tax on the salmon industry. – For the first time since the 90s, foreign investors fear political risk in Norway, said Conservative politician Jon Gunnar Pedersen during the party’s national meeting in March. But the claims receive little support among currency experts in London’s financial community whom news has spoken to. Little political risk in Norway – There is very little political risk in Norway, as we see in emerging economies, for example. Seen from a currency analyst’s perspective, it is not something we normally look closely at, says Fransesco Pesole at ING. He believes there are other factors that drive the krone exchange rate, primarily that there is little trading in the Norwegian krone. Norwegian kroner is the least liquid (least traded) among the G 10 currencies, which are among the world’s ten most traded currencies. Norges Bank’s krone sales (to buy foreign currency) have also contributed to weakening the krone, Pesole believes. Kit Juckes says the main explanation for the weak Norwegian krone is the difference in interest rates against the eurozone. – What could Norges Bank do? – They could increase the pace of interest rate increases and act faster when the European Central Bank picked up the pace, says Juckes. Gaute Langeland at Norges Bank. Photo: Johan B. Sættem Gaute Langeland at Norges Bank says: – We have a floating exchange rate and no particular target for the krone exchange rate. The krone sale is a banking service we perform on behalf of the state which is completely separate from monetary policy, says Langeland.
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London analysts: The krone will strengthen strongly next year
