Kronen svekkes etter global børssmell

The Norwegian krone surged after a sharp decline in US stock markets on Thursday. Kjetil Olsen, chief economist at Nordea, attributes the fall mainly to technical factors. Olsen explains that Norwegian life and pension companies hold significant amounts of foreign stocks and bonds, which are protected from currency fluctuations.

When stock markets drop, these companies are overwhelmed and quickly adjust their positions by selling Norwegian krone and buying dollars. This process is almost mechanical, especially when falls are severe, according to Olsen. Stock markets rebounded on Friday in New York, while Oslo Børs ended the day lower. Oil prices have also dropped.

Last week, the krone reached its strongest level since 2022. Currently, the dollar is at 10.07 krone, the euro at 11.84 krone, and 100 Swedish kroner equals 109 Norwegian kroner. The strengthening of the krone this year is linked to the rise in oil and gas prices following US and Israeli attacks on Iran. Oil prices are closely tied to the krone.

Oil companies earn more in dollars when oil prices are high, so they quickly convert their earnings into Norwegian kroner to pay taxes later. As they earn more, they buy more krone. Oil prices have fallen recently, contributing to the surge in the krone. Olsen notes that the krone has also strengthened more than oil prices alone would suggest.

Automatic funds have amplified the surge, and political unrest in France has weakened the euro. At the start of the year, one euro was worth 11.84 krone, now it is 10.56. A stronger krone leads to lower import price growth from abroad but also lower earnings for export companies, potentially dampening wage growth. Olsen emphasizes that a weaker krone has the opposite effect and strengthens import price growth.

After Thursday's sharp fall, the krone remains about one percent stronger than the level set by the central bank. Olsen points out that a further krone strengthening does not automatically lead to higher interest rates. The central bank considers various factors, often moving in different directions. Thursday evening saw a dramatic stock market fall in the US, particularly in the technology sector, attributed to fears of slowing AI investments after Democrats won both houses of Congress in the midterm election.

Democrats' victory has raised concerns about the expansion of data centers, a theme that has permeated the election campaign. The downturn also comes after many AI-related stocks surged.