There is full corona panic in the financial markets and the krone is falling sharply.
It has rarely been more expensive to shop from foreign online stores such as Amazon, Asos and Ebay than right now. This is due to a new downturn for the Norwegian krone.
The krone goes down to its weakest against the euro on Friday morning since the big corona crash this spring, when it was at its lowest ever.
- One euro is now worth 11.15 kroner, against 10.80 kroner as late as Tuesday.
- One dollar is now worth 9.55 kroner, compared to 9.18 kroner earlier this week.
- The same movements are not seen against the Swedish krona, but a Swedish krona is still worth more than the Norwegian krone.
DNB Markets writes in a report that the krone has “been beaten”.
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– These are slightly brutal movements we have seen in recent days, writes currency strategist Magne Østnor in DNB Markets.
More expensive to shop online
As is well known, a weak Norwegian krone means expensive trips abroad, but this is hardly relevant for many Norwegians in these times, given that almost all countries are red. More urgent is thus that the weakening of the krone makes goods we buy from abroad more expensive.
It can be directly, through purchases on foreign websites such as Amazon, or by goods that are imported to Norway being set up in price. This typically applies to electronics, such as iPhones, or cars, such as Tesla.
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Østnor says that both weaker growth prospects and lower oil prices are a strong contributor to the weakening of the krone.
– We should also not rule out that speculators have been positioned for a stronger krone in light of the fact that the Norwegian economy has done well through the crisis and does not see as serious a development of infection as in some European countries, writes Østnor.
At the same time, he believes that this is another example of the self-reinforcing spiral that is set in motion for the krone exchange rate when global financial markets weaken. As DNB has previously pointed out, the movements in the US stock market index S&P 500 are the best indicators of how the Norwegian krone exchange rate will develop in the long run.
Read more here: DNB: This affects the krone the most
– The wave of infections, shutdowns and political uncertainty have led to a fall in the stock market. For Norwegian managers, this means that they have hedged more than necessary and that the market value of these hedges has fallen in line with the weakening of the krone, he says.
– Adjustments after the financial crisis mean that the managers must then provide more security to their counterparty in the hedges the following day, which provides a clear incentive to reduce the amount of the hedge. It provides a clear incentive to reduce the insurance amount. It involves selling money.
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