The Norwegian krone is down almost 4% against the U.S. dollar today.
In currency markets, that’s a huge move, and the krone is easily the worst performer in foreign exchange today, even though dollar strength is sending currencies reeling around the world.
Three things are contributing to the krone’s extraordinary weakness against the dollar:
- The Norges Bank decision: This morning, Norway’s central bank left the benchmark interest rate unchanged at 1.5%. However, it also lowered its interest rate forecasts for 2013 and 2014, saying in a statement that “there are prospects that the key policy rate will remain at the current level, or somewhat lower, in the year ahead.”
- Oil: Norway is one of the world’s largest oil exporters, and the strength of the krone depends to some extent on oil, which is getting wrecked today as part of a broader commodity sell-off driven by weaker-than-expected manufacturing data out of China overnight.
- Dollar strength: The U.S. dollar is strengthening pretty much around the world today after Federal Reserve Chairman Ben Bernanke struck a hawkish tone in yesterday’s FOMC press conference, laying out a roadmap for tapering back U.S. monetary stimulus and encouraging the recent rise in Treasury yields.
The move in the dollar-krone exchange rate today is the biggest since 2008. Right now, the pair is trading right around 6.00 kr.
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