Norwegian krone the weakest among the world's major currencies
The Norwegian krone is now the weakest currency among the world's most traded currencies, according to the Bloomberg index.
The Norwegian krone is one of the G10 currencies, which are the world's most traded and used currencies.
The current list of G10 currencies includes the United States dollar (USD), the Euro (EUR), the UK's pound sterling (GBP), the Japanese yen (JPY), the Australian dollar (AUD), the New Zealand dollar (NZD), the Canadian dollar (CAD), the Swiss franc (CHF), the Norwegian krone (NOK), and the Swedish krona (SEK).
However, the krone is the weakest of the currencies so far this year measured against the dollar, the newspaper E24 reported on Sunday, quoting financial firm Bloomberg's index.
The index shows that the Norwegian krone's value has fallen by 9.44 percent since the turn of the year. On Monday, one US dollar was trading at 10.78 kroner.
The Japanese yen is the second-weakest currency (down 8.75 percent against the US dollar in 2023), followed by the New Zealand dollar (down 3.26 percent against its American counterpart).
According to the Bloomberg index, the strongest currency is the British pound, which is up 5.22 percent against the dollar this year.
No upswing on the horizon for the krone
Nils Kristian Knudsen, a currency strategist at the Handelsbanken bank, told the newspaper that he expects the krone to remain weak for an extended period.
"We are facing a turning point on many fronts now where the markets are still very uncertain about the future direction of interest rates, in the sense that we have not yet reached the point where normalisation is envisaged," Knudsen said.
READ MORE: Historically weak krone to lead to higher interest rates
The expert said that the first half of the year had been characterised by a sharp rise in interest rates in Norway, which has had a negative effect on the Norwegian krone. Norway's central bank has been using interest rate rises to curb inflation and slow down the economy to prevent it from overheating.
"The krone is a currency that does well when there is a tailwind (i.e. strong economic conditions), and that is not the case now."
Knudsen also said that during times of economic uncertainty, investors tend to prefer traditionally strong major currencies.
"It is not just the Norwegian krone that is under pressure. One can, for example, look over to Sweden, which also has a weak krona today. The markets prefer the more traditional and safe currencies, such as the dollar," he said.
The currency strategist added that the economic outlook would need to look more certain for the krone to strengthen. He pointed to a peak in the interest rates as a sign the markets look for that conditions are beginning to normalise.
"As long as we are not there (the interest rate peak), we have to expect the krone to both fluctuate more and to be quite a bit weaker in some periods as well," he said.
Although, many currency strategists also argue a higher interest rate could act as a tonic for the weak krone. This is because higher interest rates in other countries than in Norway are pointed to as a factor as to why the krone is currently a less attractive proposition to investors.
The effect of last week's interest rate hike
Last Thursday, the key interest rate in Norway was raised by 0.5 percentage points by the central bank (Norges Bank), which means that the key interest rate is now 3.75 percentage points.
As a result, the krone strengthened by around 12 øre. However, the krone weakened again after the short spike.
"Seen in isolation, the interest rate hike helped and contributed to a stronger krone, but there were also factors over which Norges Bank has no control that contributed to a weaker krone," currency strategist Bjørn Roger Wilhelmsen at Nordkinn Asset Management told E24 at the time.
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The Norwegian krone is one of the G10 currencies, which are the world's most traded and used currencies.
The current list of G10 currencies includes the United States dollar (USD), the Euro (EUR), the UK's pound sterling (GBP), the Japanese yen (JPY), the Australian dollar (AUD), the New Zealand dollar (NZD), the Canadian dollar (CAD), the Swiss franc (CHF), the Norwegian krone (NOK), and the Swedish krona (SEK).
However, the krone is the weakest of the currencies so far this year measured against the dollar, the newspaper E24 reported on Sunday, quoting financial firm Bloomberg's index.
The index shows that the Norwegian krone's value has fallen by 9.44 percent since the turn of the year. On Monday, one US dollar was trading at 10.78 kroner.
The Japanese yen is the second-weakest currency (down 8.75 percent against the US dollar in 2023), followed by the New Zealand dollar (down 3.26 percent against its American counterpart).
According to the Bloomberg index, the strongest currency is the British pound, which is up 5.22 percent against the dollar this year.
No upswing on the horizon for the krone
Nils Kristian Knudsen, a currency strategist at the Handelsbanken bank, told the newspaper that he expects the krone to remain weak for an extended period.
"We are facing a turning point on many fronts now where the markets are still very uncertain about the future direction of interest rates, in the sense that we have not yet reached the point where normalisation is envisaged," Knudsen said.
READ MORE: Historically weak krone to lead to higher interest rates
The expert said that the first half of the year had been characterised by a sharp rise in interest rates in Norway, which has had a negative effect on the Norwegian krone. Norway's central bank has been using interest rate rises to curb inflation and slow down the economy to prevent it from overheating.
"The krone is a currency that does well when there is a tailwind (i.e. strong economic conditions), and that is not the case now."
Knudsen also said that during times of economic uncertainty, investors tend to prefer traditionally strong major currencies.
"It is not just the Norwegian krone that is under pressure. One can, for example, look over to Sweden, which also has a weak krona today. The markets prefer the more traditional and safe currencies, such as the dollar," he said.
The currency strategist added that the economic outlook would need to look more certain for the krone to strengthen. He pointed to a peak in the interest rates as a sign the markets look for that conditions are beginning to normalise.
"As long as we are not there (the interest rate peak), we have to expect the krone to both fluctuate more and to be quite a bit weaker in some periods as well," he said.
Although, many currency strategists also argue a higher interest rate could act as a tonic for the weak krone. This is because higher interest rates in other countries than in Norway are pointed to as a factor as to why the krone is currently a less attractive proposition to investors.
The effect of last week's interest rate hike
Last Thursday, the key interest rate in Norway was raised by 0.5 percentage points by the central bank (Norges Bank), which means that the key interest rate is now 3.75 percentage points.
As a result, the krone strengthened by around 12 øre. However, the krone weakened again after the short spike.
"Seen in isolation, the interest rate hike helped and contributed to a stronger krone, but there were also factors over which Norges Bank has no control that contributed to a weaker krone," currency strategist Bjørn Roger Wilhelmsen at Nordkinn Asset Management told E24 at the time.
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