Headline news in Scandinavia this week revealed a recent pledge by Norway’s central bank to begin addressing its currency’s unnatural rise in strength. The Norwegian krone (NOK) tends to track the value of crude oil in the market, but the past several weeks have seen a rising NOK despite falling oil prices. The result has been a gouging effect on the nation’s exports.
Some analysts see in the recent currency shifts a sudden disconnect emerging between the price of oil and the value of the krone. Though oil prices have slumped significantly these past few days, the NOK has so far risen over 12% against the US dollar (USD) since late last year and recently touched a 4-year peak versus its regional neighbor, the euro (EUR). A recent surge in the nation’s budget surplus, and its still-AAA credit rating, have also driven many investors into the store of value its currency holds during a time of market turmoil.
In order to stave off hastily-made interest rate hikes, Norway’s Finance Minister, Sigbjoern Johnsen, stated his intention to begin adjusting the nation’s fiscal policies in order to help lower the pressure being placed on the nation’s currency, according to an article in Bloomberg. What impact this policy maneuver will ultimately have will depend on the size and scope of the intervention.
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