Norway’s krone jumped, snapping two days of losses, as rising stocks and speculation the central bank has finished cutting interest rates fueled gains in the currency of the world’s seventh-largest oil exporter.
The krone, last month’s best performing major currency against the dollar and the euro, rose 0.3 percent against the euro to 7.4569 and to 5.6878 per dollar as of 3:36 p.m. in Oslo. It was the second-best performer today versus the U.S. currency and the euro after the New Zealand dollar.
“It appears less likely today than it did a month ago that the central bank will cut the interest rate,” said Ole Andre Kjennerud, a currency analyst at DNB ASA, Norway’s biggest lender. “Definitely this adds some fuel to it.”
The economy of the world’s second-wealthiest nation is withstanding Europe’s debt crisis as rising crude oil prices fuel record petroleum investments. Manufacturing accelerated at the fastest pace in nine months in February and consumer confidence improved in the first quarter. Unemployment has fallen and retail sales have surged. The rebound may prompt the central bank Governor Oeystein Olsen to refrain from cutting the 1.75 percent benchmark rate next week, DNB estimates.
“If you look at the Norwegian economy in isolation from the world then I am sure it could handle even higher interest rates,” Kjennerud said.
The country’s central bank in December lowered its main rate by half a percentage point, its biggest cut since May 2009, to guard against the fallout on the economy of Europe’s debt crisis and to avoid excessive krone gains. Norway, which boasts the biggest budget surplus of any AAA rated nation, has emerged as a haven from the crisis. The country’s statistics office estimates Norway’s economy, excluding income from oil and shipping, will grow 2.7 percent this year, versus a European Commission estimate for a 0.3 percent contraction in the euro area.
The country’s benchmark stock index, the OBX Index, rose 1.1 percent to 383.460 by 2:52 pm in Oslo today. That’s supporting krone gains, according to Erica Blomgren, chief strategist for Norway at SEB AB. “The krone has weakened over the past days so we’re now seeing a small correction with improving risk appetite,” she said.
The central bank will meet on March 14 to decide on interest rates. The krona slid 0.8 percent against the euro yesterday.