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Norway’s krone sank against the euro and the dollar after Trade Minister Trond Giske said he’s “concerned” its strength will hurt exporters as officials in the Nordic country talk down the currency from a nine-year high.
“It is our concern because the export industries are hurting from the strong krone,” Giske said in an interview in Oslo today. “We are following the situation closely.”
The krone reached a nine-year high earlier this month after emerging as a haven from Europe’s debt crisis. It slumped 0.5 percent against the euro to trade at 7.4588 by 1:13 p.m. local time and 1 percent versus the dollar. It was the worst performing major currency against the euro and the greenback.
The government and central bank have stepped up verbal interventions over the past weeks to limit the krone’s appreciation. The strength, alongside weaker demand, has prompted some exporters to announce job cuts, including Norske Skogindustrier ASA, the world’s second-largest maker of newsprint, and Renewable Energy Corp. ASA, a Norwegian maker of solar energy components.
“Those exporters that are both hurting from the strong krone and falling markets in Europe, those are the ones we are most worried about,” Giske said. A special task group within his ministry is monitoring the situation, he said.
The currency is the fourth best performing major currency against the euro and the dollar so far this year, gaining 3.8 percent against the single currency and 5.9 percent against dollar.
The krone is “strong”, central bank Governor Oeystein Olsen said in a speech last week, adding that it was “an important variable” when setting interest rates.
The central bank in December lowered its main rate by half a percentage point to 1.75 percent, its biggest cut since May 2009, to avoid excessive krone gains and guard against the fallout of Europe’s debt crisis. In September, Olsen warned the bank had measures to keep the krone in check after a surge risked pushing down inflation and hurting exporters. Policy makers will meet next week to decide on interest rates.
“The risk of a further significant appreciation of the krone that could reduce growth and inflation suggests that the key policy rate should be kept low,” Bjoern Roger Wilhelmsen, chief currency strategist at Swedbank First Securities in Oslo said in a note. Wilhelmsen expects the bank to keep rates unchanged next week.
The government is meeting this weekend for its 2013 budget conference where they will discuss fiscal spending for next year. Giske called for a “moderate budget expansion” as one of the “answers” for keeping the krone in check.
To contact the reporter on this story: Josiane Kremer in Oslo at firstname.lastname@example.org
To contact the editor responsible for this story: Tasneem Brogger at email@example.com