"The nature of proof, the Nordic": the Norwegian krone is not afraid of the bottom

Trading 10 oct 2019 Donner votre avis

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Individualism and determination to keep up with world central banks actively reducing interest rates puts the Norwegian krone in a special position. This Scandinavian means of payment, despite the subsidence in relation to the leading currencies of the world, is trying to maintain its position.

On Tuesday, October 8, the Norwegian krone was trading at lows along with other Scandinavian currencies. Pressure on quotes was exerted by low oil prices, as well as concerns about the prospects for the global economy and the preservation of the previous volumes of raw material production in Norway. It was previously expected that fossil fuel reserves in the country would last for 30-50 years, but due to the deterioration of the external background, these forecasts are being revised.

A rather favorable effect on the Scandinavian means of payment was exerted by another increase in interest rates of the central bank of Norway. Recall that during this year, Norges Bank raised rates four times, arguing that this contributes to economic growth and a decrease in the debt burden. The Norwegian central bank believes that such measures help normalize inflation and do not have a negative impact on the country's stable economy.

According to analysts, such a rise in rates helps the Norwegian krone to strengthen. For example, on September 19 of this year, when the regulator once again raised the key rate from 1.25% to 1.5%, the Norwegian currency grew against the euro. EUR/NOK was trading at 9.858, and after the decision of the central bank of Norway, its rate reached 9.895. The regulator began raising the rate from a low of 0.5%, and then gradually increased it to 1.5%. According to experts, such trends demonstrate favorable changes in the Norwegian economy.

Experts do not exclude further growth of the EUR/NOK pair in the event of a significant deterioration in risk sentiment. The catalyst for this development of events could be a failure in trade negotiations between the US and China, analysts suggest. Currently, the EUR/NOK pair has exceeded the psychologically important level of 10.00 amid increased risk appetite. Now the pair is trading in the range of 10.069-10.071, although in the first half of the day it was close to 10.053-10.054.

The Norwegian krone is highly dependent on oil prices. Recall that the country is one of the largest exporters of black gold. The recent attack on refineries in Saudi Arabia and a further increase in commodity prices have triggered a stronger Norwegian krone against the euro. The Norwegian authorities are worried about the unstable geopolitical situation, in particular, doubts about the success of the trade negotiations between China and the United States, as well as the prospects for a worsening global economy. Such factors limit the rise in oil prices and drive the krone into a bearish scenario.

Norway receives the lion's share of revenue from oil production and sales. Such dependence contributes to some volatility of the Norwegian currency, however, the country's internal economic stability does not allow the krone to sink to the bottom. The Norwegian economy is showing positive results, seeking to continue to move in this direction. This allows the national currency to stand steady on its feet, demonstrating an unbending character and readiness to withstand any economic threats.

The material has been provided by InstaForex Company - www.instaforex.com

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