“Why Norwegian Makeup Lovers are Facing Higher Prices Due to Weakened Krone, According to Blivakker Founder Einar Øgrey Brandsdal”

Blivakker founder Einar Øgrey Brandsdal says that suppliers’ prices are rising as a result of a weakened Norwegian krone. It’s bad news for makeup-loving Norwegians.

– There is constant feedback from the suppliers that the prices will go up, up, and up all the time because of the currency. So everything just becomes a lot more expensive, he says.

Brandsdal does not fear for his own shop operation, but says that it will be more expensive for the “everyman”.

– It’s not the case that if you have poor finances, you cut out lipstick, deodorant or hair wash. You buy it anyway. You almost have to have it, he says.

The Norwegian krone has weakened sharply, and is at a historically weak level.

Now you have to fork out approximately 11.6 Norwegian kroner for one euro. So far this year, the krone has weakened by around 10 per cent.

Five months ago, one euro cost DKK 10.7, and five years ago it cost DKK 9.5.

Compound cause

Analysts and economists have been scratching their heads, trying to find answers to what is happening to the Norwegian currency. Many believe the cause is complex.

There has also been discussion in recent weeks about what needs to be done to slow down the krone’s fall.

Here are some of the most important reasons for the weak krone that have been mentioned recently:

• Unrest in the world’s financial markets. The krone is a small currency, and in uncertain times investors gravitate towards safe havens, such as the dollar.
• The difference between interest rates in Norway and other countries. If we raise the interest rate as much as others, the interest rate differential is unchanged.
• Norges Bank’s krone sale.

The consequence of the weak krone exchange rate is both that it has become more expensive for Norwegians to go on holiday, but also that interest rates – which have already risen sharply in the past year – must be raised even more to protect the value of the krone, several major banks believe.

Dane Cekov, currency strategist at Nordea, told E24 on Thursday that he does not think the krone will strengthen in time for the holidays.

– The most likely thing is that the krone will only become less weak towards the end of the year, but unfortunately it will probably remain at a low level towards and over the summer, he says.

Weak krone in the future

Norges Bank has also had high krone sales as a result of the abnormally large gas revenues last year. This has contributed to a short-term weakening, several analysts believe.

Nordea Markets believes that krone sales to Norges Bank will increase in scope and contribute to a weak krone in the future as well, according to a note.

The rate is expected to remain weak until Christmas, and Nordea Markets predicts that one euro will cost NOK 11 at the turn of the year.

Krone sales must not be confused with currency intervention, which means that the central bank sells kroner to influence the krone exchange rate.

The krone sales are offset over time to a large extent by the oil companies’ krone purchases to pay tax, but due to their size they can still affect the krone exchange rate, especially because the exchanges do not necessarily coincide in time.

Chief economist believes the system is not working

Recently, there have been discussions about whether the krone sale to the central bank is working as it should.

Daily krone sales (exchange) were cut by NOK 100 to 1.4 billion per day in May.

– The krona does not strengthen itself on this. It will weaken further, said Bjørn-Roger Wilhelmsen in Nordkinn Asset Management to E24 earlier this week.

Kjetil Olsen, chief economist at Nordea Markets, believes that the tripling of Norwegian gas exports from 2021 is an important reason for the fluctuations that we are now seeing.

– It has to do with timing. The oil companies bought a lot of kroner last autumn when gas prices were high. They don’t pay taxes until a few months later. The net flows have thus gone from krone positive to more or less neutral or negative. It is a big change, and it helps to strengthen the weakening of the krone’s value, he says.

Olsen also points out that the euro has strengthened strongly in recent months. The currency gained momentum when the European Central Bank (ESB) began its aggressive rate hikes last summer.

Wilhelmsen, on the other hand, believes that the exchange routine needs a refresher if you are to be able to have predictability for the krone.

He believes that the system does not work as intended, as there are major problems with timing.

– The krona has a small market. Liquidity can be challenging at times. Such a large mismatch contributes to, and can intensify, fluctuations in the rate. It is unfortunate, he says.