Norwegian krone momentum continues on Norges bank actions
- Norwegian krone has rallied by more than 12% against the euro and the dollar.
- Norges bank has taken up more measures to strengthen the krone in the past week.
- Norway has been affected by Coronavirus and low oil prices leading the government to tap giant wealth fund
Norwegian krone continued to strengthen against the euro and the dollar as the market weighed the latest action by the Norges Bank and the government.
Norwegian krone gains against euro & dollar
On Tuesday, the country’s central bank extended the period in which banks can access F-loans to the end of March. These loans are intended to fund businesses in this time of crisis. The bank also announced its intention to sell foreign exchange on behalf of the government that will be equivalent to NOK 2000 million every day.
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As a result of these actions, the Norwegian krone has gained by more than 12% against the euro and the dollar in the past one week.
Norway affected by Coronavirus
As with all countries, Norway is going through a difficult period as the number of cases continue to increase. According to data, more than 4,800 Coronavirus cases have been confirmed in the country. In the past three days, the number of reported cases have been on an upward trajectory according to data from World of Meters.
As more Norwegians stay at home, companies have been forced to take immediate measures. The number of Norwegians filing for unemployment claims has been rising. According to the Financial Times, more than 5% of Norwegians have filed for these claims. This is a bigger number than the 1% who filed for the claims in the United States in the past week.
Meanwhile, the government expects the situation to get worse. Data from the government show that the economy could decline by between 1.5% and 7% this year. Until now, the government estimates that the crisis has cost the country more than $16 billion.
Norway taps sovereign wealth fund
Fortunately, Norway has something that other countries lack; a giant sovereign wealth fund. Recent reports suggest that the government is considering taking some money from the $950 billion fund to cover the cost. The amount the government will tap from this fund is not yet known but the amount could be more than $55 billion or 6% of its total value. This will be the first time that Norway has forced the fund to sell assets.
Norway hurt by low oil prices
Coronavirus has been a challenge for Norway. Still, a bigger challenge has been the low oil prices, which have dropped by more than 50% in the past few days and affected the Norwegian krone. As the biggest oil producer in Europe, Norway has been vulnerable because of how low the prices are.
The situation could worsen if oil prices remain at current low prices. Multiple reports have shown how the world is swimming in oil at a time when demand is not there. In a report yesterday, the Wall Street Journal said that many full oil tankers in Saudi Arabia had lacked a place to go.
Norwegian krone outlook
The Norwegian krone has gained by more than 14% against the euro in less than two weeks. Looking at the four-hour chart, the EUR/NOK pair is trading below the 14-day and 28-day exponential moving averages while the RSI has been dropping. The ADX has started to move up, which is an indication that the Norwegian krone could continue gaining to about 11.000.