Norway central bank currency sales policy ‘worrying signal

The direction of NOK against other currencies has become less certain in light of a policy shift at Norges Bank, according to analysts looking at the central bank’s decision to take over responsibilities for selling currency.

Kyrre Aamdal, senior economist at DNB Markets, is among those expressing concern, according to Dagens Naeringsliv.

It has reported on the decision announced by the Norwegian central bank, that not only will it not buy more foreign currency in June in regards to revenues from the country’s oil and gas industry – which go to funding the sovereign wealth fund, the Pension Fund Global – but that it is also set to take over responsibilities for selling currency.

The decision is vexing, Aamdal is cited saying, because it comes amid a marked shift in terms of the income from oil and gas. The industry has peaked while use of the fund assets has gone up. Foreign investors may see this policy shift as a precursor to the bank selling foreign currency in order to support NOK. But fears of intervention in currency markets could in turn be interpreted as a sign of weakness that is not there.

Also cited is Erik Bruce, chief analyst at Nordea Markets, saying that the move points to the bank preparing the market for a day in future when it will start to buy NOK. The policy on currency is also linked to expectations that there will be pressure on the bank to shift smaller amounts of currency to the Pension Fund Global in future. This could leave the central bank sitting on more foreign currency than it shifts on to the fund.


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