Norway’s krone strengthened the most in more than a month in Oslo trading amid speculation the currency’s plunge to a seven-month low is overdone.
The krone strengthened as much as 0.72 percent against the euro, the most since Sept. 7, and was up 0.6 percent at 7.4506 as of 2:25 p.m. in Oslo. It strengthened against all major currencies in a basket compiled by Bloomberg. The krone traded at 7.5246 per euro on March 1, the weakest level since July 17.
“The krone has been under rather heavy pressure in recent weeks and underperformed probably too much,” Nils Kristian Knudsen, an analyst at Svenska Handelsbanken AB, said in an e-mailed response to questions. The move may also be a reaction to short-term profit taking in various cross-rates, such as the one compared to the Swedish krona, he said.
The Norwegian krone has weakened 1.5 percent so far this year after the central bank last month signaled that it’s prepared to cut interest rates to counter krone gains. The krona in neighboring Sweden, by contrast, has surged 2.3 percent against the euro after central bank policy makers and government officials including Prime Minister Fredrik Reinfeldt have taken a hands-off approach to their currency’s strength.
A technical measure indicated the krone’s recent decline might reverse. The 14-day relative strength index against the euro reached 63 on March 1, compared to the 70 level that some traders see as sign that an asset may be about to turn around.
“With euro-dollar and euro-krona heading south for the last month, it was a question of time before the euro-krone followed,” Magne Oestnor, a currency analyst at DNB ASA, said by phone from Oslo.
The Swedish krona has jumped 3.8 percent against its Norwegian counterpart this year. It lost 0.6 percent today. The RSI on the Swedish krona, Norwegian krone last week reached 78 on March 1, above the 70 level that may signal reversal.