The Norwegian krone is in shock – E24

The Norwegian krone has strengthened steadily against all G10 currencies over the past month.

After all, the krone has strengthened against lower-interest currencies such as the Swiss franc and the Japanese yen. One euro and one dollar are quoted at 11.39 and 10.47 on Tuesday morning. This is nine and eleven øre less than the day before, respectively, and 46 and 64 øre less than the peak on April 30.

Import weight kroneImport weight kroneAccording to Norges Bank, the import-weighted exchange rate index (I44) is the geometric mean of the exchange rates of 44 countries. It is now one percent stronger than Norges Bank's forecast for the second quarter, three percent weaker than a forecast earlier in the month.

Kjersti Haugland, chief economist at DNB Markets, writes in a report on Tuesday morning that Norges Bank's interest rate efforts to help reduce inflation appear to be paying off.

Indicates a greater willingness to take risks

– The central bank has a key player: Risk appetite in the market has increased, following Fed Chairman Powell's May 1 height US interest rates are highly unlikely, Haugland writes in the report.

– He writes that willingness to take risks facilitates offensive strategies among speculators, such as “territorial games”.

According to Haugland, the fact that Norges Bank is not expected to cut interest rates until December seems to have fueled interest in buying the Norwegian kroner against the Swedish kroner.

– More Crohn friendly climate

Nils Kristian Knudsen, currency strategist at Handelsbanken, told E24 just before the weekend that the krone's strengthening in recent weeks was not just a fluke.

He pointed out that financial conditions worldwide have improved, among other things, that stock markets are performing well and that investors are willing to take more risks.

– High volatility is associated with a weak crown. So it's a very Crohn's-friendly climate, Knudsen said on Friday.

Dan Sekow, currency strategist at Nordea Markets, said the Norwegian krone has strengthened at the same time as US interest rate expectations have fallen – and vice versa.

– I think it's because the dollar has weakened in recent weeks and interest rate expectations have come down a bit. A few weeks ago there was speculation that the US Federal Reserve might raise interest rates again, Chekov said.

Increased interest rates make a country more attractive to investors because returns are higher. This increases the demand for the currency and strengthens the exchange rate.

Therefore, US and European key interest rates are important for the Norwegian krone exchange rate.

At the Federal Reserve's previous interest rate meeting, Fed Governor Jerome Powell said there was no possibility of an interest rate hike.