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Tuesday, April 23, 2024

Norway’s currency may take a dive

A highly respected currency expert at Japanese securities firm Nomura in New York has issued a few warnings about the future value of the Norwegian currency, the krone. Jens Nordvig, originally from Denmark, told newspaper Dagens Næringsliv (DN) on Friday that he thinks the Norwegian currency will “weaken considerably” against the US dollar.

It's up to Norges Bank to decide what's printed on Norwegian currency. PHOTO: Views and News
Norway’s currency has already been losing some of its record strength, and now an expert on exchange rates thinks it will ‘weaken considerably’ next year. PHOTO:

Nordvig, ranked as #1 in Currency Strategy by Institutional Investor for the past three years in a row, told DN that the Norwegian economy “has been very strong for a very long time. It won’t last forever.”

Signs of an economic slowdown have been emerging all year, and Nordvig noted that Norway’s central bank has acknowledged that in its interest rate policy.

Jens Nordvig PHOTO: Nomura
Jens Nordvig PHOTO: Nomura

“I think we will see more and more of this in the future,” Nordvig said, adding that he and his colleagues at Nomura “have been negative towards both Sweden and Norway for some time. Even though the countries are different, both have managed well during the (recent euro and global economic) crisis. Now the cycle in these countries is beginning to get exhausted.”

After years of record strength against other currencies, the Norwegian krone already has fallen markedly in the past few few months. In September, it cost NOK 5.79 to buy one US dollar. Two months later it cost NOK 6.22.

(For current values of the krone, see our constantly updated Exchange Rates graph in the right-hand column.)

Nordvig predicts the krone’s value will slip some more, good news for Norwegian exporters already worried about the competitiveness of their products because of Norway’s high cost levels, but not so good in the long run or for Norwegians traveling abroad. Moreover, as Norway’s economy slows down, Nordvig points out that Europe’s economy is picking up after years of crisis.

“We’re beginning to see other European countries that have been hit hard by the crisis go from downturn to growth,” Nordvig told DN. “In light of that, I think the Norwegian krone will weaken further.”

Nordvig, a frequent commentator in such publications as The Financial Times and The Wall Street Journal, recently wrote a book about the fall of the euro and was a finalist for the Wolfson Economics Prize for also authoring the essay Rethinking the European monetary union. He’s seen as an expert on currency valuation.

In his analyses of the Norwegian krone against the euro, he also has come to believe that the euro will also weaken against the dollar in 2014. “When you put these two things together, the krone can weaken considerably against the dollar,” Nordvig said. “I think we’ll see movement of 15 percent, 4-5 percent from the Norwegian foot and 10 percent from the European.”

British bank Barclays also expects the dollar to strengthen against the euro next year. Norway’s krone fell to its lowest level against the euro for four years after last week’s meeting of the Norwegian central bankers, who kept interest rates at their current low level. Berglund



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