Norway's Krone Is Bearing the Brunt of Oil Slump to 2-Month LowBy
Nordic currency is more correlated with crude than peers
Weakens 22 percent during the past 12 months versus dollar
Norway’s krone is suffering more than any other major currency from the sliding price of oil.
The currency, which fell to an almost one-month low against the dollar on Tuesday, has been more correlated with crude during the past 12 months than the Canadian dollar, Mexican peso or Brazilian real, data compiled by Bloomberg show.
Norway, western Europe’s biggest petroleum producer, has halved benchmark rates in the past year to 0.75 percent as policy makers look to boost other areas of the economy and avert a recession. Officials are prepared to do what’s needed to fight the risk of economic contraction, central bank Governor Oeystein Olsen said Oct. 23, before a Norges Bank meeting next week.
“The relationship there is strong and, among the more commonly traded currencies, it’s one of the most correlated,” said Josh O’Byrne, a London-based currency strategist at Citigroup Inc. “With a slightly lower oil curve, they could increase the probability that they might ease before year-end, but given where inflation is, it’s unlikely to be the base case.”
The krone has a 0.86 correlation with the price of petroleum in London, where a reading of 1 would indicate the two moved in lockstep. Canada’s dollar has a 0.81 relationship, the peso’s is 0.78, while the real has a 0.66 correlation with crude.
Norway’s currency slipped as much as 1.8 percent to 8.4810 per dollar on Tuesday, the weakest since Sept. 30. Oil fell to $46.97 a barrel in London and $43.39 in New York, its lowest close since Aug. 27.
Declines in the price of natural gas are also hitting the nation. Front-month natural-gas prices in the U.K., Europe’s most-traded market, have fallen to the lowest for this time of year since 2009 because of oversupply and declining demand.
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