Pay/login wall
this post was submitted on 16 Sep 2024
30 points (100.0% liked)
Europe
1520 readers
716 users here now
News and information from Europe 🇪🇺
(Current banner: La Mancha, Spain. Feel free to post submissions for banner images.)
Rules (2024-08-30)
- This is an English-language community. Comments should be in English. Posts can link to non-English news sources when providing a full-text translation in the post description. Automated translations are fine, as long as they don't overly distort the content.
- No links to misinformation or commercial advertising. When you post outdated/historic articles, add the year of publication to the post title. Infographics must include a source and a year of creation; if possible, also provide a link to the source.
- Be kind to each other, and argue in good faith. Don't post direct insults nor disrespectful and condescending comments. Don't troll nor incite hatred. Don't look for novel argumentation strategies at Wikipedia's List of fallacies.
- No bigotry, sexism, racism, antisemitism, dehumanization of minorities, or glorification of National Socialism.
- Be the signal, not the noise: Strive to post insightful comments. Add "/s" when you're being sarcastic (and don't use it to break rule no. 3).
- If you link to paywalled information, please provide also a link to a freely available archived version. Alternatively, try to find a different source.
- Light-hearted content, memes, and posts about your European everyday belong in !yurop@lemm.ee. (They're cool, you should subscribe there too!)
- Don't evade bans. If we notice ban evasion, that will result in a permanent ban for all the accounts we can associate with you.
- No posts linking to speculative reporting about ongoing events with unclear backgrounds. Please wait at least 12 hours. (E.g., do not post breathless reporting on an ongoing terror attack.)
(This list may get expanded when necessary.)
We will use some leeway to decide whether to remove a comment.
If need be, there are also bans: 3 days for lighter offenses, 14 days for bigger offenses, and permanent bans for people who don't show any willingness to participate productively. If we think the ban reason is obvious, we may not specifically write to you.
If you want to protest a removal or ban, feel free to write privately to the mods: @federalreverse@feddit.org, @poVoq@slrpnk.net, or @anzo@programming.dev.
founded 4 months ago
MODERATORS
Tap for Article
Norway’s weak currency presents a mystery
The country’s economy is thriving yet the krone is becoming less and less valuable. What’s going on?
photograph: alamy
Sep 12th 2024
Norway’s gdp per person is $94,600, some 11% higher than America’s. The country’s unemployment rate is 2%. Growth, though slowing, has been higher than the rest of Europe’s in recent years. And the Norwegian sovereign-wealth fund, capitalised with oil revenues, is now worth over $300,000 per inhabitant.
chart: the economist
What could be better? Answer: the currency. Norwegians are fretting about the krone, which since the end of 2020 has fallen by 8% against a trade-weighted basket of currencies and flirted with all-time lows against the dollar and the euro, following a decade of slower-paced weakening (see chart). In a country that imports almost all its consumer goods, this has added to inflationary pressure. Norges Bank, Norway’s central bank, is confused as to how the country’s economy can be doing so well and its currency so poorly. An official currency commission may follow.
One commonly cited explanation for the fall in value is a lower oil price. Although this may account for some weakness, it fails to explain why the krone did not rebound along with energy prices in 2021-22. Instead, it fell in 2022 even as oil prices surged. Something else is at play.
Analysts at Apollo Asset Management look to interest-rate differentials. As the Federal Reserve raised rates aggressively in 2022-23, the attractiveness of holding dollars rather than krone rose. Norges Bank, responding to the currency’s weakness, seems set to hold rates at 4.5% for the rest of this year, even as the Fed cuts. But this does not tell the whole story either, since the krone has weakened against lots of currencies, including the euro, with which interest rates diverged much less.
Perhaps it is freak pricing. Low trading volumes mean that anomalies may persist, as big investors will be reluctant to enter the market, given that large interventions will interfere with prices. The Bank for International Settlements, a central-banking club, puts krone turnover at just $125bn a day, against $2.3trn for the euro.
A final possibility will be the most alarming to Norwegians. The krone could still be overvalued, with its long march down being a return to normality after the country became a safe haven from the economic turmoil that hit Europe a decade ago. The Economist’s Big Mac index notes that a burger was priced at nkr74 in Norway against $5.69 in America as of June, implying an exchange of nkr13 to the dollar compared with the market rate of nkr11. A further fall would be good news for tourists in Oslo, who would no longer be quite so shocked by the prices. It would be less welcome for Norwegian consumers.
For more expert analysis of the biggest stories in economics, finance and markets, sign up to Money Talks, our weekly subscriber-only newsletter.
This article appeared in the Finance & economics section of the print edition under the headline “Nordic noir”