Norway’s krone fell to a three-week low versus the dollar as economists said the central bank will keep interest rates unchanged today and signal it will stay on hold to deter investors from buying the currency as a haven.
The krone also dropped for the first time in three days against the euro as analysts predict the Norges Bank will lower its rate forecast from October. Sweden’s krona weakened after a central bank survey showed policy makers will cut their benchmark rate over the next year.
“The krone declined today ahead of the rate decision but any weakness is likely to be temporary,” said Peter Rosenstreich, head of currency analyst at Swissquote Bank SA in Geneva. “The central bank has some very tough choices and a delicate balancing act to do as the krone continues to find buyers. We expect some heavy-handed verbal intervention, but outright intervention seems less likely for now.”
The krone depreciated 0.6 percent to 5.7308 per dollar at 10:18 a.m. London time after falling to 5.7328, the weakest since Feb. 17. The currency fell 0.4 percent to 7.4859 per euro. Sweden’s krona dropped 0.3 percent to 6.7929 per dollar.
Norwegian policy makers are grappling with a dilemma over how to cool an expanding property market and a commodities-driven recovery without spurring krone gains and hurting exports. Investments in the oil and gas industry are estimated to rise to a record 186 billion kroner this year.
The central bank will leave its overnight deposit rate at 1.75 percent, according to all but two of 16 economists surveyed by Bloomberg. Policy makers cut rates by half a percentage point in December. The announcement is scheduled for 2 p.m. in Oslo.
The krone strengthened 3.1 percent this year, according to Bloomberg Correlation-Weighted Indexes, the second best performer behind New Zealand’s dollar. The Swedish krona declined 0.1 percent.
“The krone’s strength is, to some extent, a byproduct of Norway’s unparalleled fundamentals,” Chris Walker, a currency strategist at UBS AG in London, wrote in a note to clients. “We expect any move on Norwegian rates to be gradual and expect no change in headline policy just yet. These offsetting factors are likely to be market drivers for some time.”
Finance Minister Sigbjoern Johnsen said on March 11 that the government will seek to keep spending in check this year to prevent the economy from overheating.
The krone’s strength “is an important concern when we set the overall framework for 2013,” Johnsen said.
Sweden’s main interest rate will be at 1.4 percent in the next year, from 1.5 percent now, according to a survey of labor market organizations, purchasing managers and money market participants commissioned by the central bank. The economy will grow 1.6 percent in the next 12 months and 2.3 percent the following year, according to the survey published today.
Norwegian 10-year bonds fell for a second day, with yields rising eight basis points to 2.47 percent.