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Saturday, April 20, 2024

Norway’s currency weakens again

UPDATED: The value of Norway’s currency, the krone, fell once again at the end of the country’s long Easter holiday. The latest decline came on Monday, when financial markets remained open in most of the rest of the world, and some financiers blame Norway’s left-center government.

The weak Norwegian krone can boost exports but also prices at home, and now it’s at its lowest level in a long time. PHOTO: Norges Bank

By Monday evening, a US dollar cost NOK 10.96 and a euro cost NOK 11.77. By mid-morning on Tuesday, the krone had strengthened a bit, but still cost NOK 10.94, its weakest level in many months and nearly as weak as it was when the pandemic began in the spring of 2020. The exchange rate against the British pound was also unfavourable for Norwegians on Tuesday, at a cost of GBP 13.73.

Much of the decline in the krone’s value is tied to a strong dollar and euro, while some investors and currency analysts also point to policies of Norway’s left-center government.

“Extremely weak leadership, irrational and populistic priorities, a tax policy that undermines long-term value creation and political scandals coming from left and right considerably raise the risk of investing in Norway or the Norwegian krone,” financier and veteran businessman Anders Onarheim told newspaper Dagens Næringsliv (DN). He’s spent 40 years in both Norwegian and international business and led local operations of the brokerage firm Carnegie in Norway for many years.

He and others believe the weak krone reflects declining confidence in Norway and its economic policies. Surprise taxes slapped against businesses and some of the country’s biggest industries like fish-farming have sparked loud protests, and Finance Minister Trygve Slagsvold Vedum of the small Center Party (which is strongly anti-EU and favours farmers and local interests) has often come under strong criticism. Many Norwegian investors and business owners have moved to Switzerland in order to cut their taxes and especially escape Norway’s annual fortune tax on net worth.

The Labour-Center minority government’s efforts to re-distribute income during its past two years in office have also stirred controversy. Recent public opinion polls show it has the support of less than 25 percent of voters. The government, meanwhile, defends its tax policy, stresses that inflation is easing and that interest rates have likely topped out. Unemployment is also low, at 3.8 percent.

It’s still left Norway’s once powerful petro-krone, which was long fueled by its oil and gas industry, as a shadow of its former self. Norway’s central bank, meanwhile, has been most concerned with trying to bring down the inflation rate (currently at 4.5 percent) to just 2 percent, and dramatically raised interest rates in moves also aimed at strengthening the krone. While some economists expected the current policy rate of 4.5 percent would be lowered last month, it wasn’t, and the central bank governor now hints no rate cuts will occur until this autumn.

Onarheim also criticized the former Conservatives-led government, claiming that policy differences between Labour and the Conservatives have become “less and less.” He noted how the scandal involving former Conservatives Prime Minister Erna Solberg’s husband, whose stock trading landed her in serious conflicts of interest, were “met with deafening silence” within the party and had no consequences for Solberg herself, since she remains as party leader and the Conservatives’ candidate for prime minister in next year’s national election. Onarheim noted that “new forces” rarely slip into the party organizations in Norway, he told DN, claiming “that’s not healthy for democracy.”

By Tuesday evening the krone had strengthened a bit, trading at NOK 10.845 against the US dollar. A euro cost NOK 11.67. Berglund



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