July 27 (Bloomberg) -- Norway’s krone declined the most against the euro in more than four months as European policy makers expressed support to preserve the common currency amid concern over a breakup of the 17-nation bloc.
The krone weakened as much as 1.17 percent to 7.4795 per euro, the most since March 14, and traded at 7.4684 as of 2:42 p.m. in Oslo. The currency fell against all other 16 major currencies tracked by Bloomberg and is poised for its first weekly loss since end of June.
European Central Bank President Mario Draghi said yesterday policy makers will do whatever is needed to preserve the euro. The comments at a conference in London yesterday fueled speculation the ECB will unveil new measures to tackle the region’s debt crisis as surging bond yields in Spain and Italy threaten the future of the bloc.
“For the short-term it has gone fairly quick and the Norwegian krone does look at risk of a temporary correction,” said Kasper Kirkegaard, senior currency strategist at Danske Bank A/S, by phone. “If you look at the weekly flow data from Norges Bank it doesn’t look like positioning is very stretched but if we do see further short squeeze in the euro that will also hurt the Norwegian krone, of course.”
German Finance Minister Wolfgang Schaeuble said today he welcomed the comments made by Draghi to take necessary steps within the operational rules of the central bank.
The Norwegian krone emerged as a haven amid Europe’s debt crisis as investors fled the euro area. Norway is the world’s third-richest country per capita and has no net debt, thanks to its $580 billion sovereign wealth fund.
“For the medium to long-term we’re still fairly bullish,” Kirkegaard said. “The arguments that have taken the Norwegian krone stronger this year and last year are intact. It’s still a world where you still focus on high sovereign credit quality -- Norway has that.”
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