While the Norwegian krone usually struggles in times of increased market volatility, the recent risk-off mood in markets due to the war in Ukraine and the following spike in commodity prices helped the krone to outperform, even against safe haven currencies, with USDNOK dropping to November 2021 levels in March despite rising US rates and a broadly stronger dollar. Meanwhile, EURNOK, which is less affected by US rates, is currently trading near its lowest levels since 2018. We expect the Norwegian krone has room to strengthen further in the near-term if risk sentiment improves while energy prices remain high, however, over the medium term, narrowing monetary policy divergences will likely cap NOK gains as even the more dovish central banks like the European Central Bank and the Riksbank have now moved to signal tighter policy.
Read our latest NOK Update here:
Author: Ima Sammani, FX Market Analyst
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