Norway’s krone slumped to its lowest level against Sweden’s currency in more than nine years as interest rate prospects in the two largest Nordic economies diverge.
The krone slumped as much as 1.2 percent to 1.0678 Swedish krona, the weakest since March 12, 2004, and was down 1 percent at 1.07 as of 3:47 p.m. in Oslo. The move extends the krone’s decline to eight consecutive days. Norway’s Finance Minister Sigbjoern Johnsen said yesterday weak economic data signaled growth in Scandinavia’s richest economy may be “below trend” this year.
Swedish unemployment declined more than estimated to 7.2 percent in July, from 9.1 percent a month earlier, a report today showed, boosting the potential for a faster rate increase in the largest Nordic economy. At the same time, traders are reconsidering the potential for higher rates in Norway, after data this week showed the economy grew 0.2 percent in the second quarter, less than a third the estimated pace.
“It all started off with the rather weak GDP numbers in Norway,” said Carl Hammer, currency strategist at SEB AB in Stockholm. “The GDP number itself, while disappointing, the details in the GDP number were driven by temporary factors in inventory adjustments rather than in more important factors for growth.”
DNB ASA, Norway’s largest bank, yesterday predicted that slowing growth in western Europe’s largest oil exporter will probably lead the central bank to keep rates unchanged until the first quarter of 2015. The central bank kept its benchmark interest rate at 1.5 percent in June and signaled an increased chance for a rate cut next month to support growth and prevent inflation from slowing further.
Policy makers have kept borrowing costs unchanged since March 2011 to limit gains in the krone, which emerged as a haven from the euro crisis.
Hammer said he expects the krone will recover as the move is “a bit exaggerated.”
“In a long term perspective the Norwegian krone is approaching more attractive levels,” he said.