The Norwegian krone slid the most in 15 months against the euro after Norges Bank Governor Oeystein Olsen said the key policy rate will be at the “current level, or somewhat lower, in the year ahead.”
Norway’s currency declined the most since November 2011 against the dollar. The central bank kept its benchmark rate at 1.5 percent at its meeting today, as forecast by 21 of the 22 economists surveyed by Bloomberg. The central bank predicted the key rate would be 1.38 percent in the fourth quarter of this year, versus an earlier forecast of 1.45 percent.
“The price action has been quite extreme,” said Michael Sneyd, a currency strategist at BNP Paribas SA in London. “The language showed a bias towards the prospects of a rate cut. A lot of the market was expecting the Norges Bank to remove this scope, so that was a big surprise.”
The krone slumped 1.6 percent to 7.7988 per euro at 11:15 a.m. in London, the biggest one-day drop since March 14, 2012. It slid to 7.8023, the weakest since December 2011. Norway’s currency fell 2.4 percent to 5.9145, the largest decline since Nov. 9, 2011.
The krone has weakened 2 percent this year, according to the Bloomberg Correlation-Weighted Indexes that track 10 developed-market currencies. The euro and the dollar both strengthened 4.8 percent.