During the pandemic, the Norwegian central bank conducted a study to understand why the “crown” was being pressured. They found that Norwegian fund managers have relatively high security levels. Steiner believes that this may have also contributed to the significant drop in the currency in recent weeks.
“They have bought a lot of Norwegian crowns to hedge their currency risk, and at the same time, they have large exposure to the USA. So when the markets drop as significantly as they have, the fund managers become over-secured. They then have to sell Norwegian crowns, which further depresses the currency,” he says.
In the long run, the chief analyst still believes that Norwegians will have their revenge, given that Trump’s stated goal is to weaken the dollar.
“In such a dollar environment, both the Swedish and Norwegian crowns should benefit,” says Steiner.
But in the short term, the development is likely to be determined by the general risk appetite and the price of oil, he adds.
“If the markets continue to fall, you will probably see further weakening.”
The Norwegian krona has been under pressure during the pandemic due to the high security levels of Norwegian fund managers. This has led to a significant drop in the currency in recent weeks as fund managers have had to sell Norwegian crowns to offset their over-secured positions. However, in the long run, analysts believe that both the Swedish and Norwegian crowns will benefit from a weakening dollar. The short-term outlook depends on the general risk appetite and the price of oil, which will determine the direction of the Norwegian krona in the near future.