The Norwegian krone was among the very top performing
currencies in 2012 and the currency has started 2013 in similar style. The NOK
has spent January making hefty gains against the USD and GBP, though has given
away some ground to the EUR, which has rallied across the board in recent
weeks.
The Norwegian economy certainly still looks set to warrant
plenty of investment in 2013. With a budget surplus of 15% of GDP in 2012, the largest
of any AAA nation, Norway is a shining example of fiscal discipline against a
backdrop of soaring global debt levels. Norway’s debt is as safe from default
as can be.
The country’s booming oil and gas sectors will continue to
support Norwegian growth levels this year, while rising employment and wage
growth will also contribute to progress. That said, the latest unemployment
update from Norway showed a surprise rise to 3.5% but this is likely to be a
mere blip. The Norwegian manufacturing sector has suffered as a result of
waning external demand (from the eurozone) and a strong currency but rising
investment in the oil sector will more than compensate for this. Norwegian GDP
could be as high as 3.0% this year, which would surely be the strongest among the
G10 economies.
In terms of the Norges Bank’s monetary policy, firm
Norwegian growth over the past year has not translated into higher interest
rates thanks to very subdued inflation levels and a strong currency. Norges
Bank Governor Olsen has expressed concern over rising household debt levels and
rising house prices and there have been clear suggestions that a hike to the
current 1.50% interest rate is on the horizon; we are expecting a hike to 1.75%
in May.
We expect the NOK to outperform GBP, USD, SEK and most probably the EUR this year.
Richard Driver
Currency Analyst
Caxton FX
Showing posts with label norway. Show all posts
Showing posts with label norway. Show all posts
Wednesday, 30 January 2013
Thursday, 15 March 2012
NOK/JPY Overview and Outlook for 2012
The Norwegian krone has made an extremely impressive start to 2012. It was the top performing currency in February, which is largely due to a combination of domestic economic strength and soaring oil prices.
Amid worrying developments in Iran, the price of Brent crude oil is trading at what is more than a three year high of $126 per barrel, which represents a 15% climb since the start of the year. As a major producer of oil, the Norwegian economy stands to benefit and by association so too does its currency.
On a domestic level, Norwegian manufacturing and retail sector growth and declining unemployment has improved sentiment towards the NOK, while a widening trade surplus shows that its export sector is not being hit by the eurozone downturn as other economies are. The Norwegian economy grew by an impressive 0.6% in the fourth quarter of 2011 and forward looking surveys are pointing towards a quicker pace of growth in 2012. Amid rising investment in Norway’s oil and gas sector, growth seems firmly underpinned while other global economies face a very uncertain year. As such, Norway’s stable, AAA-rated economy has seen the krone take on the role of something of a safe-haven currency so far this year.
The only real question mark hanging over the Norwegian krone is the monetary policy of the Norges Bank. The state of Norwegian economic growth wouldn’t suggest the need for interest rate cuts but that is what we have seen this week. The Norges Bank has surprisingly followed its December rate cut of 0.50% with a further 0.25% cut. With the Norwegian base rate currently standing at 1.25%, the krone’s interest rate differential has clearly been heavily reduced. More significantly though, the move suggests that the Norges Bank is very concerned with the appreciation we have seen in the Norwegian krone. A further cut to the base rate this year cannot be discounted.
Despite the NOK’s minor sell-off in response to the Norges Bank’s move this week, NOK/JPY has climbed by over 14% from January’s lows of 12.65, to its current level of 14.45. High oil prices and strong growth are likely to sustain demand for the NOK moving forward. The Norges Bank’s discomfort with the krone’s appreciation will slow the pace of this pair’s climb (and regardless, it is highly unlikely that the yen can also maintain its current pace of depreciation). Nonetheless, NOK/JPY should see gains past 16.00 in the second half of this year.
Richard Driver
Currency Analyst
Caxton FX
Amid worrying developments in Iran, the price of Brent crude oil is trading at what is more than a three year high of $126 per barrel, which represents a 15% climb since the start of the year. As a major producer of oil, the Norwegian economy stands to benefit and by association so too does its currency.
On a domestic level, Norwegian manufacturing and retail sector growth and declining unemployment has improved sentiment towards the NOK, while a widening trade surplus shows that its export sector is not being hit by the eurozone downturn as other economies are. The Norwegian economy grew by an impressive 0.6% in the fourth quarter of 2011 and forward looking surveys are pointing towards a quicker pace of growth in 2012. Amid rising investment in Norway’s oil and gas sector, growth seems firmly underpinned while other global economies face a very uncertain year. As such, Norway’s stable, AAA-rated economy has seen the krone take on the role of something of a safe-haven currency so far this year.
The only real question mark hanging over the Norwegian krone is the monetary policy of the Norges Bank. The state of Norwegian economic growth wouldn’t suggest the need for interest rate cuts but that is what we have seen this week. The Norges Bank has surprisingly followed its December rate cut of 0.50% with a further 0.25% cut. With the Norwegian base rate currently standing at 1.25%, the krone’s interest rate differential has clearly been heavily reduced. More significantly though, the move suggests that the Norges Bank is very concerned with the appreciation we have seen in the Norwegian krone. A further cut to the base rate this year cannot be discounted.
Despite the NOK’s minor sell-off in response to the Norges Bank’s move this week, NOK/JPY has climbed by over 14% from January’s lows of 12.65, to its current level of 14.45. High oil prices and strong growth are likely to sustain demand for the NOK moving forward. The Norges Bank’s discomfort with the krone’s appreciation will slow the pace of this pair’s climb (and regardless, it is highly unlikely that the yen can also maintain its current pace of depreciation). Nonetheless, NOK/JPY should see gains past 16.00 in the second half of this year.
Richard Driver
Currency Analyst
Caxton FX
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