April 23 (Bloomberg) -- Norway’s krone weakened to the lowest level against the euro in more than a year amid speculation that the Nordic nation’s central bank will cut interest rates next month to boost prices.
The currency, which has emerged as a haven from Europe’s debt crisis, slumped to a 15-month low against the euro today before trading 0.4 percent lower at 7.668 as of 11:40 a.m. in Oslo. The krone was weaker against all major currencies in a basket compiled by Bloomberg apart from the Swedish krona.
Norges Bank Governor Oeystein Olsen yesterday warned that inflation in the world’s fourth-richest nation per capita was “disturbingly low” for a central bank. Olsen, who has held the bank’s benchmark interest rate at 1.5 percent for more than a year, has signaled he’s willing to cut the rate to curb krone gains that are hurting exporters and weighing on inflation.
“As long as the market tends to price in a higher probability of an interest rate cut from Norges Bank, that should for the time-being act as a drag on the krone,” said Nils Kristian Knudsen, a rate and currency strategist at Svenska Handelsbanken AB in Oslo.
Norwegian inflation slowed for a second month in March to the slowest pace since April last year, Statistics Norway said on April 10. The inflation rate, adjusted for taxes and energy prices, fell to an annual 0.9 percent from 1.1 percent in February, the statistics agency said. Prices were estimated to rise 1.1 percent, according to the median of 11 economist estimates compiled by Bloomberg.
The krone rose to a record on an import-weighted basis in February and has helped keep inflation below the bank’s 2.5 percent target since 2009.
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