Norway’s weak krone to strengthen in the long-term
Experts believe that the Norwegian krone, which hit historic lows against other currencies earlier this year, will strengthen against both the euro and dollar in the longer term.
The Norwegian krone has had a tumultuous 2023 so far. The currency hit historically weak levels earlier this year after a sharp drop in exchange rate value against other major currencies.
At the time of publication, an American dollar cost 10.78 Norwegian kroner and a euro cost 11.51 Norwegian kroner. The krone has also struggled against the British pound, with one pound being worth 13.30 Norwegian kroner.
The krone’s strengthening is linked to global interest rate peaks, Handelsbanken’s interest rate and currency strategist, Nils Kristian Knudsen, has told publication E24.
“The backdrop is that we believe that a normalisation of interest rates will first come in the US, then during the second quarter of next year,” Knudsen said.
“When that normalisation starts, i.e. interest rate cuts, we think that at the same time, a journey to a weaker US dollar will be initiated. When the strengthening we have seen of the dollar in the last ten years comes to an end, we will be able to see that the Norwegian krone can start to recover a little again,” he added.
Interest rate differentials have been pointed to as a reason why the krone has weakened so significantly against other countries. Interest rates have been typically higher in other countries over the past 12-24 months.
It is expected that the US central bank and the European Central Bank (ECB) will begin to cut rates faster than the Norwegian central bank.
Other factors also weakening the krone have been market turbulence, and due to the krone being smaller than other currencies, it was more affected. Lower oil, gas and energy prices have also played a part.
Knudsen said that currently, the krone was a bit undervalued compared to other currencies.
Unfortunately, the krone’s recovery won’t be as rapid as its devaluation. Knudsen said that just over a year from now, a dollar would cost 9.65 kroner, and a euro would be worth 10.90 kroner. By the end of 2025, a dollar is expected to cost 9.15 kroner and a euro 10.70 kroner.
Furthermore, while the krone will steadily recover against the euro and the dollar over the next two years, the strengthening is unlikely to signal the end of a decade-long slump for the Norwegian krone.
“Yes, it is a stronger krone, but in many ways, it is also a continuation of the weak trend we have seen for the krone since 2013,” Knudsen said.
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The Norwegian krone has had a tumultuous 2023 so far. The currency hit historically weak levels earlier this year after a sharp drop in exchange rate value against other major currencies.
At the time of publication, an American dollar cost 10.78 Norwegian kroner and a euro cost 11.51 Norwegian kroner. The krone has also struggled against the British pound, with one pound being worth 13.30 Norwegian kroner.
The krone’s strengthening is linked to global interest rate peaks, Handelsbanken’s interest rate and currency strategist, Nils Kristian Knudsen, has told publication E24.
“The backdrop is that we believe that a normalisation of interest rates will first come in the US, then during the second quarter of next year,” Knudsen said.
“When that normalisation starts, i.e. interest rate cuts, we think that at the same time, a journey to a weaker US dollar will be initiated. When the strengthening we have seen of the dollar in the last ten years comes to an end, we will be able to see that the Norwegian krone can start to recover a little again,” he added.
Interest rate differentials have been pointed to as a reason why the krone has weakened so significantly against other countries. Interest rates have been typically higher in other countries over the past 12-24 months.
It is expected that the US central bank and the European Central Bank (ECB) will begin to cut rates faster than the Norwegian central bank.
Other factors also weakening the krone have been market turbulence, and due to the krone being smaller than other currencies, it was more affected. Lower oil, gas and energy prices have also played a part.
Knudsen said that currently, the krone was a bit undervalued compared to other currencies.
Unfortunately, the krone’s recovery won’t be as rapid as its devaluation. Knudsen said that just over a year from now, a dollar would cost 9.65 kroner, and a euro would be worth 10.90 kroner. By the end of 2025, a dollar is expected to cost 9.15 kroner and a euro 10.70 kroner.
Furthermore, while the krone will steadily recover against the euro and the dollar over the next two years, the strengthening is unlikely to signal the end of a decade-long slump for the Norwegian krone.
“Yes, it is a stronger krone, but in many ways, it is also a continuation of the weak trend we have seen for the krone since 2013,” Knudsen said.
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