Norway’s ‘krone’ caught in a storm

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UPDATED: Never before has Norway’s currency, the krone, had a more unstable summer, according to analysts in Oslo. It’s as unstable as the weather has been, rising and falling often in different directions against the euro and the US dollar, and it hasn’t been as weak as it is now for years.

Norway's krone has been riding the waves of the most volatile summer in years. PHOTO: newsinenglish.no

Norway’s krone has been riding the waves of the most volatile summer in years. PHOTO: newsinenglish.no

“The probability of (summertime) currency exchange surprises has been higher than ever before,” Thina Saltvedt, chief analyst at Nordea Markets, told newspaper Dagens Næringsliv (DN) early last week. Her comments came as Norwegians found themselves having to pay more than NOK 8.2 for a US dollar but just under NOK 9 for a euro. The krone later regained some strength against the dollar, but was back at the NOK 8.2 level on Friday morning.

Earlier this month, the krone had gained value against the dollar and lost against the euro, so this week the situation was quite different. It cost nearly NOK 13, meanwhile, to buy a British pound this week. It only cost just over NOK 9 a few years ago.

Norwegians traveling abroad during their annual summer holidays this month have seen vacation budgets swing dramatically. The euro has become cheaper while the dollar has become more expensive. A hotel room costing USD 100 a night in the US now costs a Norwegian NOK 820, compared to around NOK 620 two years ago.

The currency exchange volatility is pegged to many factors, no longer just the fall in oil prices that abruptly cut the value of Norway’s petro-kroner in half last year. Now the krone is swinging because of the debt crisis in Greece, a stock market collapse in China and the international agreement on Iran’s atomic program.

“This summer is shaping up as the most volatile of all, even though we’re only halfway through it,” Saltvedt told DN. The volatility is highest since the euro was introduced in 1999, according to Nordea Markets’ analysts’ own calculations. Neither last year’s oil price collapse nor the finance crisis in 2008 led to the kind of exchange-rate swings seen now.

Saltvedt noted that there has been higher volatility during other times of the year but not during the summer months, when currency exchange rates arguably are most noticeable for Norwegians out traveling. She said the situation in China and the oil prices are now the two most important factors influencing the value of Norway’s currency.

The poorer exchange rates haven’t stopped Norwegians from heading abroad, however, with the bad weather this summer leading to a record year for package tour operators. The weaker krone is also attracting more foreign tourists to Norway, while companies that are export-oriented are finding it easier to compete internationally. Norsk Hydro reported more record results on Tuesday despite lower aluminum prices, mostly because of high demand and sales volume.

newsinenglish.no/Nina Berglund

  • JMNORDIC

    Many essential products in main supermarkets have increased its prices more than 30% in the last two months. Others just dissapeared from the shelves. Great part of them or their components are imported. The weakness of the Norwegian Krone turns them more expensive and the consumer has not other choice that pay for that. If this scenario persists, inflation is knocking the door. Inflation destroys salaries and national currency. Something is going wrong.

    • frenk

      Correct – I’ve been stating this for years…..

      • JMNORDIC

        But everybody here seems to be so happy. I never heard a complaint. Perhaps because everybody is getting loans from the banks thanks to the low rates of interests. Everybody is thinking in buying new houses, expensive cars, boats, exotic holydays, etc. that technically will belong to the banks. I am not a technician, just an observer, but I am sure that Norway has at present one of the highest internal debt per capita in the world. It is like a party on the deck of the Titanic.

        • frenk

          I was looking at onions in the supermarket yesterday….they come from New Zealand…and Egypt….not surprised they are so expensive?

        • Johan Åsenheim

          Get ready for hyperinflation. You cannot devalue your currency 40% and not expect serious consequences.

          But of course Norwegians don’t care, they all inherited crummy little shacks in the woods from their grandparents that are now worth tens of millions of kroner. Immigrants will have to pay the price for that pyramid scheme that ensures the wealth of most Norwegians.

          Why rock the boat over a 30% rise in food prices?

      • Rachel

        My name is Rachel and I live in the south of Norway with my husband. I usually read the comments on this website. I like what you guys have to say. I was wondering if anyone can tell me if the norwegian economy is going to go through very difficult times? I also heard from some people that the petroleum companies are no longer finding so much oil in the north sea is this true?

        Thanks

        • JMNORDIC

          The situation is that Norway has put all his chips to the oil and gas industry for too many years. Now the international price of the oil is falling down deamatically, so the Norwegian economy is slowing down in accordance. The main side efect of this is the lose of value of the Norwegian Krone. As Norway has to import many essential products to be paid in foreign currency, it is necessary to deliver more Norwegian Kroner that in the past. This turns more expensive all that products in the domestic market and cause inflation. At present Norway has not alternative industries capable of exporting enough goods to compensate the old incomes from the exports of oil and gas. So the picture is not the best and it is not depending in the present stage on how much oil could be find in the North Sea. What is necessary is to be humble enough to recognize that there are problems and adopt the proper economic policies.

          • frenk

            ‘Adopt the proper economic policies’……the government isn’t doing anything…..they are not even honest enough to recognize the ‘real issues’….
            The Norwegian business sector or Norwegian people are not ‘built/designed’ for competition……

  • Raj Calay

    I totally agree with you. Leaders need to wake up and ” open working areas & opportunities in order to motivate the people to work instead of waiting petty cash”. Health statistics suggest that the population is healthier than most but Norway has one of the highest rates of both sickness and disability in the OECD. It seems that government takes with one hand in higher taxes and gives out with another.
    There is no motivation for hard work and acquiring skills in Norway.
    Norway needs more diverse industry and decrease imports. Universities should conduct research leading to products and not just publications.