Undervalued krone likely to rebound later this year

The Norwegian krone has been the worst G10 performer against the US dollar by some way in recent months. Though lower energy prices and weakening risk sentiment have likely played a role, we suspect foreign exchange transactions by Norges Bank are also partly to be blame. With the krone looking severely undervalued by most metrics, we expect a rebound later this year once near-term pressures have passed.

In view of the wider interest, we are also sending this FX Update to clients of our Nordic & Swiss Economics service.