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CURRENCY

Coronavirus and oil send Norway’s krone plummeting to new low

An unusually sharp dip in oil prices over the weekend has left Norway’s already-weakened currency at its lowest-ever value compared to the euro.

Coronavirus and oil send Norway’s krone plummeting to new low
Photo: kjelljoran /Creative Commons

The depreciation of the krone increased late on Sunday night after a fall in oil prices, finance media E24 reports.

Against the euro, the krone had depreciated around 51 øre or 5 per cent as of Monday morning, E24 writes, putting 1 euro at a value of 10.95 kroner, most expensive price Norwegians have ever paid for the European single currency.

Additionally, the krone depreciated by around 31 cents or 3.39 per cent against the dollar. One dollar now costs 9.55, the worst rate for buying dollars with kroner since October 2000.

The further weakening of Norway’s currency comes when market uncertainty is also high due to the outbreak of coronavirus.

A breakdown in negotiations between Opec and Russia on Friday further exacerbated the problems facing the krone, according to E24’s report.

Just before 9am on Monday, oil prices plunged 26.68 percent to $33.39 a barrel, the biggest fall in oil prices since the Gulf War.

“It has gone from bad to worse. Oil prices have not hit bottom yet. If the supply continues to increase and there is a price war, that is going to hit the krone full on. This is happening on top of everything else,” Magne Østnor, a currency strategist with bank DNB, told E24.

READ ALSO: Why Norway's krone could keep losing value

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CURRENCY

‘Weakest since 1980s’: Norwegian krone hits new low

The Norwegian krone has fallen to its lowest level in three decades.

'Weakest since 1980s': Norwegian krone hits new low
A currency exchange office in Benidorm, Spain last week. Photo: AFP

Norges Bank, the country’s central bank, reports that the krone is at its lowest level since the end of the 1980s when measured against currencies such as the euro, dollar and pound.

On Monday afternoon, the krone was listed at 112.24 points on I44-indeksen, the exchange rate index preferred by Norges Bank.

“This is the weakest level since the late 1980s,” a Magne Østnor, currency strategist with lender DNB Markets, told NRK.

The index measures the strength of the krone against the currency of 44 of Norway's most important trading partners and is a key measure when the central bank sets interest rates.

A record-weak krone has consequences for people who are paid in Norwegian kroner when they travel abroad, as well as on the prices of foreign goods.

Tuesday’s exchange rates showed the krone at 10.20 to the euro. 9.23 to the US dollar and 12.01 to the pound, NRK reported.

READ ALSO: Norway's krone now worth 10 to the euro as value continues to drop

“It’s getting more expensive for Norwegians to go on holiday and buy foreign goods. But it is positive for the Norwegian export industry, which will become more competitive compared to its foreign counterparts as it becomes cheaper to buy Norwegian goods,” Østnor told the broadcaster.

The depreciation of the krone follows a sequence of negative news stories thought to affect investor confidence, after the currency had managed to strengthen in the lead-up to Christmas.

One of the factors that has contributed to the weak krone is the outbreak of new coronavirus in China, according to Østnor.

“The exchange value of the krone has depreciated over several years, but there is no doubt that the coronavirus has been a trigger. But the blame must also be shared with figures from the Norwegian economy which show that growth at home is slowing, the analyst told NRK.

“We must get used to the fact that the krone will remain at this level in future. The krone is at a record low looking backwards but fits well with the situation in the Norwegian economy at the moment,” he added.

READ ALSO: Why Norway's krone could keep losing value

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