Norwegian Krone: Policy action shows currency strength is not just a problem unique to the Australian dollar

• 

Details

Category: Exchange Rates

Published on Thursday, 15 March 2012 10:09

Written by Will Peters

The Norwegian Krone (Currency:NOK) has advanced against a host of currencies, but the moves are not nearly enough to recover yesterday's losses.

Behind the falls was a 25 bp cut to the deposit rate at the Bank of Norway.

"The dilemma posed by trying to navigate a commodities driven boom while ensuring that the soaring currency does not inflict collateral damage on the economy is not just an Australian problem. The 25bp overnight cut by the Bank of Norway (which took the overnight deposit rate to 1.5%) showed that they too are concerned over currency strength, even though the latter is largely beyond their control," says a morning note from ANZ Bank.

---

Advertisement - Article Continues Below

---

Indeed, the Australian dollar has had a poor week, prior to today, and this will be welcomed by a country that is starting to notch up some weaker than expected economic data releases. Many are pointing fingers at the strength of the Australian dollar (Currency:AUD).

Back to Norway, "Governor Olsen could not be more explicit when he noted. 'the continuing downturn abroad and the strong krone are contributing to keeping inflation low and are weighing on growth in Norway,'" say ANZ Bank.

Prior to the rate cut the krone had reached a nine-year high as investors lapped up the higher returns offered by AAA rated Norway, and while the krone has eased a touch since then it may only be a temporary respite.