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In its morning report on Friday, DNB Markets describes the state of the Norwegian economy.
There, currency strategist Magne Østnor of DNB Markets writes, among other things, that the crown is falling sharply.
– Once again, the crown has been defeated. We have seen slightly brutal moves in recent days, and since Tuesday night the krona has weakened by almost 40 øre against the euro and the dollar, Østnor writes.
A dollar costs 9.66 crowns on Friday morning, while a euro is worth 11.17 crowns.
Although both weaker growth prospects and lower oil prices contribute greatly to the weakening of the krona, this is yet another example of the self-reinforcing spiral that is setting in motion, Østnor writes.
He points out how the wave of infections, closures and political uncertainty have caused the stock market to fall.
– For Norwegian managers, this means that more than necessary has been hedged and the market value of these hedges has fallen in line with the weakening of the krone. Post-financial crisis adjustments mean that managers must provide more security to their counterparty in hedging the next day, providing a clear incentive to reduce the amount of hedging. It involves selling crowns, explains the currency strategist.
He also believes that speculators may have positioned themselves in favor of a stronger crown because “the Norwegian economy has done well during the crisis and does not see infection as severe as in some European countries.”
