Krone falls most in a year on bank surprise
The Local Norway - [email protected]
Published: 20 Jun, 2014 CET.
Updated: Fri 20 Jun 2014 09:30 CET
The Norwegian krone crashed 2.3 percent against the euro on Thursday, after the country's central bank revised down its economic forecast on expectations of a downturn in the country's oil sector.
The drop, the biggest since June 20 last year, came as Norges Bank unexpectedly ruled out an increase in interest rates until the end of next year, confounding expectations of gradual monetary tightening. Øystein Olsen, the bank's governor told the Wall Street Journal that the bank had anticipated a strong reaction from the market. "We expected the krone to weaken immediately after we had published our rate path," he said in an interview. "We thought, with good reason I think, that we surprised slightly on the downside compared with market expectations." He told Reuters that in place of the expected interest rate rise there was “at least a 25 per cent chance” that rates would be further reduced if there were any negative surprises for the economy. The bank's decision followed a survey issued last week by Norway’s statistics agency which showed that oil companies would cut their investments in the country by 21 percent next year. The bank had previously expected a 10 percent drop.
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The drop, the biggest since June 20 last year, came as Norges Bank unexpectedly ruled out an increase in interest rates until the end of next year, confounding expectations of gradual monetary tightening.
Øystein Olsen, the bank's governor told the Wall Street Journal that the bank had anticipated a strong reaction from the market.
"We expected the krone to weaken immediately after we had published our rate path," he said in an interview. "We thought, with good reason I think, that we surprised slightly on the downside compared with market expectations."
He told Reuters that in place of the expected interest rate rise there was “at least a 25 per cent chance” that rates would be further reduced if there were any negative surprises for the economy.
The bank's decision followed a survey issued last week by Norway’s statistics agency which showed that oil companies would cut their investments in the country by 21 percent next year.
The bank had previously expected a 10 percent drop.
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