The central bank surprises with a sharp cut in krone sales, and the krone strengthens following the news. – Much better than I had imagined, says the currency strategist.
Several encronations collected. Photo: Erlend Aas / NTBPublished:
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Norges Bank adjusts daily krone sales down to 350 million per person in January, from 1.4 billion in the first two weeks of December.
The krone immediately strengthened against both the euro and the dollar after the news. Minutes after the release of the figures, one euro went from costing NOK 11.26 to NOK 11.19, and one dollar from NOK 10.18 to NOK 10.12.
– This is surprisingly low, I would say. It is much better than I had imagined, says currency strategist Dane Cekov at Nordea.
In advance, Cekov expected a significant cut, and that krone sales would land at between 700 million and one billion per day.
Now he believes the krone exchange rate will get off to a very good start to the year. After the figure from Norges Bank was published, he believes that we will be able to see a krone exchange rate of below NOK 11 to the euro as early as January.
Currency strategist Dane Cekov at Nordea. Photo: Adrian Nielsen
The krone sale (exchange) takes place to transfer other currency to the Oil Fund, which invests abroad. It must not be confused with currency intervention, which means that the central bank sells or buys kroner to influence the krone exchange rate.
Even if krone purchases and sales are balanced over time, the central bank’s sales can still affect the krone exchange rate, both because of the size and because the exchanges do not necessarily take place at the same time.
Fewer kroner to be transferred
The reason why Norges Bank is now cutting krone sales is because the government’s income will be lower in 2024, according to Cekov.
– Then the surplus of kroner to be transferred to the Oil Fund will be lower.
The currency strategist has calculated that Norges Bank will have to sell an average of around NOK 700 million per day throughout 2024, after seeing the proposal for the state budget in October.
But in January, there will therefore be fewer kroner than what is to be sold.
The crown in swing
The krone has fluctuated quite a bit this year, and has weakened against both the euro and the dollar. This means that it costs us more to shop from, or travel in, the countries that use euros and dollars. In return, it will be easier to sell Norwegian goods abroad.
For several years, Norges Bank bought kroner on behalf of the state, so that oil revenues in foreign currency could be used over the state budget.
But from April last year the situation reversed, when the krone flows exceeded the amount that was supposed to go into the national budget. Considerable kroner sums from the oil companies’ tax payments are now sold every day.
As a rule, Norges Bank has tried to smooth out the krone transactions throughout the year, in order to avoid unnecessary unrest in the currency market. In the last year, however, there have been unusually large changes.
2023-12-29 09:00:25
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