As the US dollar continues to strengthen rapidly against almost all major currencies, USDNOK has reached its highest level ever.
Worsening concerns about the global impact of Coronavirus and plunging crude oil prices have created a perfect storm for commodity currencies, especially NOK.
- The main character in this story remains the US dollar and its relentless global demand, as investors attempt to escape the liquidity crunch and run for the safest currency.
- Major firms and banks are seeking dollars to pay off debts and keep business running during containment measures. Despite all the easing by the Federal Reserve, including two emergency rate cuts, hundreds of billions of QE and opened swap lines, the pressure is not abating and USD pushed higher against other major currencies today.
- The oil price collapse weighs heavily on the Norwegian Kronadue to the Norwegian economy’s heavy reliance on oil exports. The escalating Saudi-Russia price war and growing concerns about global demand dragged Brent oil prices to the lowest levels in 17 years, dropping below $25 a barrel. Oil markets are not only down on the spot level, but the futures curves flattened further as well, which does not bode well for a petrocurrency like NOK.
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Author: Ima Sammani, Junior FX Market Analyst at Monex Europe.