The big fluctuations for the krone continue. Nettavisen wrote a week ago that The krone was at its strongest since March. 1 euro cost far down to eleven kroner.
And in mid-July, 1 dollar was below the magical 10 kroner limit. But on Thursday afternoon, 1 dollar costs NOK 10.30 in the foreign exchange market. (see the graph below), 1 euro is almost NOK 11.27.
– The development must be seen in the light of the rise in interest rates in the USA. This particularly applies to interest on loans with a long term. These interest rates are now at their highest since November 2022, says senior strategist Dane Cekov at Nordea Markets to Nettavisen. We shall return to US interest rates.
A weakened krone means that foreign currency becomes more expensive. Seen in isolation, this leads to more expensive trips abroad and higher import prices. The positive thing is that Norwegian goods are becoming more competitive.
Hardly 4.50 percent
– What do you think about the krone exchange rate going forward?
– In the coming months, we imagine that the krone will weaken to around 11.50 against the euro and around 10.75 against the dollar. But there will be big fluctuations around these levels, Cekov predicts.
– What will affect the krone?
– Norges Bank will probably not raise to 4.50 per cent, as the market is now expecting. This speaks for a somewhat weaker krone. On the other hand, oil and gas prices will quietly rise somewhat towards winter. That speaks for a stronger krone, replies Cekov.
He says the inflation figures will affect interest rate expectations and stock markets internationally.
– This will be decisive for the krone exchange rate towards the end of the year, predicts the strategist.
Nordea Markets believes the dollar will strengthen somewhat during the autumn. This is due to both the higher interest rates and lower risk in the stock market. Then the investors look for the big markets and not commodity-exposed markets like the Norwegian one.
Need to borrow more money
– Why are US interest rates rising?
– Long-term interest rates have risen partly on the basis of the announcement from the Ministry of Finance in the USA about increased borrowing. They will build up a money buffer in the government account after the debt ceiling problem.
– Higher interest rates in the US and a slightly more pessimistic view of the eurozone have resulted in a stronger dollar. At the same time, higher interest rates have resulted in somewhat lower share prices. That explains a stronger dollar against Norwegian kroner, says Cekov.
Analysis agency Fitch this week downgraded the US credit rating.
This means that the US government debt is considered a little less safe for investors. Such downgrades normally mean higher interest rates. It is the high national debt in the United States that is frightening. The US has a gill ceiling in danger of being blown up.
2023-08-03 17:40:30
#Norwegian #krone #turns #decisive
