The Norwegian krone is one of the G10 currencies, which are the most traded and used currencies in the world, however, it is currently the weakest against the dollar, reports the electronic publication, citing the index of the financial company Bloomberg.
The index shows that the value of the Norwegian krone has fallen by 9.44% since the start of the year, highlights the poststating that one US dollar was trading on Monday at 10.78 crowns.
The Japanese yen is the second weakest currency (down 8.75% against the US dollar in 2023), followed by the New Zealand dollar (down 3.26% against its US counterpart), according to the same source.
Consulted by E24, Nils Kristian Knudsen, monetary strategist at Handelsbanken, said he expects the krona to remain weak for quite an extended period.
“We are now facing a turning point on many fronts where markets are still very uncertain about the future direction of interest rates, in the sense that we have not yet reached the point where normalization is contemplated” , he estimated.
The expert pointed out that the first half of the year was characterized by a sharp rise in interest rates in Norway, which had a negative effect on the Norwegian krone, noting that the country’s central bank used the interest rate hikes to curb inflation.
The krone is a currency that does well when there are strong economic conditions and that is not the case now, Knudsen said, adding that in times of economic uncertainty, investors tend to prefer major traditionally strong currencies.
“It’s not just the Norwegian krone that’s under pressure. We can, for example, turn to Sweden, which also has a weak krone today. Markets prefer more traditional and safer currencies, such as the dollar,” he explained. The currency strategist added that the economic outlook should look more certain for the krona to strengthen. He pointed to a spike in interest rates as a sign that markets are looking for conditions to begin to normalize.
“Until we get to that (the peak in interest rates), we should expect the krona to fluctuate more and also be a bit weaker at times,” he said.
However, many monetary strategists also argue that a higher interest rate could act as a tonic for krona weakness. Indeed, higher interest rates in other countries than in Norway are seen as a factor as to why the krone is currently a less attractive proposition for investors.
The current list of most traded currencies includes US Dollar (USD), Euro (EUR), British Pound (GBP), Japanese Yen (JPY), Australian Dollar (AUD), New Zealand Dollar (NZD), Canadian dollar (CAD), Swiss franc (CHF), Norwegian krone (NOK) and Swedish krona (SEK).