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Throughout Tuesday, the crown exchange rate strengthened and, for the first time since the start of the crown crisis, one euro on Tuesday was worth less than 11 Norwegian kroner.
One euro cost NOK 10.99 early Tuesday night, a decrease of 1.25 percent during the day. One dollar cost NOK 10.13, a decrease of 1.7 percent.
Nordea Markets chief economist Kjetil Olsen notes that the exchange rate often has a special correlation with the price of oil, but that there are several factors that play a role when the crown has now strengthened.
Kjetil Olsen.
(Photo: Ida von Hanno Bast)
– It is not easy to identify some very precise controllers, but there is a wildcard that we believe is part of this development, he says.
The size of the government budget deficit determines how much NOK will be converted from the currency to NOK. A large part of this exchange is done through oil companies, which can, for example, make profits in dollars, and when they pay taxes and fees in Norway, this is paid in Norwegian kroner.
Norges Bank must cover more of the deficit when revenues decrease in oil revenues.
A major crown buyer on the course
Olsen believes that Norges Bank’s acquisition of NOK 2.1 billion every day may not have been noticed as well yet, but that it plays a teasing role for the crown exchange rate.
– We believed that crown purchases from Norges Bank could have been a driving force in strengthening the crown over time, but we were not sure when, says Olsen.
The chief economist notes that this represents around 4-5 percent of the daily crown turnover in the market.
“For example, if these mechanisms receive more attention among international hedge funds that want to join in that way, they can again strengthen the crown a bit by taking some speculative positions,” says Olsen.
The state’s oil revenue is shrinking, while spending is increasing sharply, which means that the government in the revised national budget proposes to double the withdrawal of the Oil Fund to NOK 480 billion.
On Thursday of last week, Norges Bank cut its key policy rate to record zero percent. Although the krona exchange rate did not have the biggest impact after the publicity, the krona depreciated to 10.30 against the US dollar and 11.12 against the euro.
Collapse of the crown in March
The decline in the krona exchange rate has been largely influenced by the drop in oil prices and the slowdown in society.
Everything peaked overnight until March 19, when the crown’s exchange rate collapsed, and the price of euros and dollars rose by more than 50 cents.
The depreciation of the crown that night occurred was powerful enough to enter the history books as one of the worst days for the crown exchange rate in the last 50 years.
When it comes to the future exchange rate of the crown, Olsen again emphasizes that it is difficult to predict directions.
– The crown is extremely exposed to risk sentiment in international markets, and the price depends on the stock markets, he says. (Terms)Copyright Dagens Næringsliv AS and / or our suppliers. We want you to share our cases using a link, which links directly to our pages. Copying or any other use of all or part of the content may only be made with written permission or as permitted by law. For more terms see here.
