Norway’s krone was keeping currency players busy on Tuesday, zooming back up to a value higher than it was before OPEC ministers failed to reduce oil production at their weekend meeting in Doha. By mid-afternoon, it cost just NOK 8.11 to buy one US dollar, its strongest level in months.
The krone also strengthened against the euro, which cost NOK 9.22, and the British pound, which cost NOK 11.68 late Tuesday afternoon. That’s a big change from late last year, when it cost more than NOK 13 to buy a pound.
Norway’s currency has been rocking and rolling this week and last, first strenghtening before the Doha meeting on speculation the price of Norway’s most important export product (oil) would rise on OPEC production cuts. When that didn’t happen, the krone was knocked back down on Monday along with oil prices, only to rebound on Tuesday.
“The oil price has recovered and that’s one reason (for the krone’s rebound),” Dagens Næringsliv (DN) cited currency analysts Camilla Viland and Jeanette Støm Fjære as writing in their DNB Markets report on Tuesday. “In general, interest in the krone seems to be rising.”
Kjetil Olsen, chief economist at Nordea Markets, also tied the krone’s swings to the volatile oil price, in the absence of other major news that could influence its value.
Oil prices recovered
After falling around 10 percent Monday morning, DN reported that oil prices rose back up to around USD 43 a barrel during the night. A barrel of Norway’s North Sea crude oil was trading at USD 43.33 Tuesday morning, compared to just USD 40.50 Monday morning. By Tuesday afternoon, oil was selling for just around a dollar less than it had been before the weekend OPEC meeting.
“The fact that oil prices did not fall more has calmed some nerves in the markets,” Viland and Fjære wrote.
DN also cited senior economist Marius Gonsholt Hov at Handelsbanken Capital Markets as writing that the mood had improved in international markets, and that had an effect on the currency markets.
“Since the oil price has crept up towards (and later beyond) USD 43 a barrel during the night, the appetite for risk has also increased in the Asian stock markets,” Hov wrote in his morning report on Tuesday. The Australian and New Zealand dollars also rose against the US dollar, while the Japanese yen fell.
The dive in oil prices over the past two years has hurt Norway’s oil-fueled economy, but the weaker kroner has actually boosted export products. Views are thus mixed when the krone strengthens, because its weakness has improved markets and the competitiveness of Norwegian products like seafood, metal and tourism.