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Norway's krone to continue to struggle against the euro

Frazer Norwell
Frazer Norwell - [email protected]
Norway's krone to continue to struggle against the euro
Photo by CAR GIRL on Unsplash

A euro is likely to cost 12 kroner a year from now, a report from one of Norway's largest financial institutions predicts.

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Norway's krone has struggled throughout a tumultuous 2023 so far, hitting lows against other major currencies such as the euro, dollar and pound.

Currently, a euro costs 11.50 kroner. A year ago, a euro was trading for less than 10 kroner. However, according to a forecast from DNB Markets, things are set to get worse as the krone is expected to trade for 12 euros next year.

DNB Markets believes the Norwegian krone would struggle due to a modest interest rate differential between Norway and other countries. Currencies in countries with higher interest rates are more attractive to investors, making the currency stronger.

"A low-liquidity currency with a modest interest rate gain vis-a-vis trading partners and an economy that increasingly has a distinctive engine based on natural resources will be priced at a lower level than we have been used to," DNB Markets said in its report.

However, while the krone would continue to struggle against the euro, it would make up ground on the US dollar. It is believed that a dollar would cost around 10 kroner in a year's time. A dollar trades for around 10.60 kroner currently.

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DNB also estimates that interest rates in Norway will not be slashed until December 2024. It believes that Norges Bank is aiming for a key policy rate of 3.25 percent by autumn 2025.

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