Chart of the day: Knocked down. All-time low for the NOK
The Norwegian krone (NOK) is under immense pressure from a double hit of mass US dollar demand and an impending oil price war. The NOK found a little relief yesterday after hitting an all-time low against the USD, but the outlook remains grim
Dollar demand and the oil price war saw USDNOK hit an all-time high yesterday of 12.1180. It was short-lived though (for now) as oil rallied 24% on the day after US President Trump threatened to get involved in the price war. The NOK found relief in the news and recouped some of its losses, closing at 11.2472 USD.
The Norwegian krone is a petro-currency, with oil being Norway’s most important industry. It accounts for more than 20% of Norway’s GDP and almost half its exports. So oil prices play a huge role in the valuation of its currency. The impending price war as Russia and Saudi Arabia ramp up production in a bid for market is tremendous stress on the NOK. Prices are so low that uncertainty looms over the profitability of major oil producers.
USDNOK has been driven to all-time highs by the sharp drop in oil prices (XBRUSD, inverted). Low oil prices are here to stay as Saudi Arabia and Russia expand oil supply.
There’s fear there won’t be enough barrels to store the surplus, which could be the biggest surplus ever, so oil dropping as low as $20 per barrel is well within reach. Both Brent and WTI crude are selling off a touch early in the Asian session.
The previous all-time high for USDNOK was 9.8350 in 1985. There’s no resistance at this high-level and the rush to hold USD in the ultimate global flight to safety will continue to strain the NOK, perhaps until we see global coordination to devalue the USD.
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