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.
“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.