This chart below doesn't need much explaining. The Norwegian Krone is moving in in-line with the oil price, which is heading north, while EURNOK is on its way south.

Norway is the world's tenth largest oil producer, and, crucially, it has a deeply stable political system. Thus, while the political crisis in the Middle East continues to rage and burn this should spur further Krone appreciation for two reasons:

1, The Mid East tension is pushing up the oil price, good news for Norway's terms of trade and economic fundamentals.

2, It also makers Norway an attractive place to rely on for your oil supplies, which should boost flows into the Nokkie for the medium to long term. .

EURNOK (orange line) and Brent crude oil (generic contract)


Yield could also turn supportive for the NOK:

Norway is one of the chief beneficiaries of the Middle East crisis, and the positive economic impact should ensure monetary policy tightening in the coming months from the Bank of Norway - another positive for the NOK.

Norway's trade balance surged in 2008 when oil prices reached $140 per barrel, back then the Bank of Norway was on a tightening cycle. The trade balance and rates tend to peak together albeit with a slight lag. Recently we have seen Norway's trade balance surge, but rates have been static since May last year. With history as a guide, a further increase in Norway's trade surplus could precipitate a rate hike in the near future. This is NOK supportive, and we think, bar a collapse in the price of crude, the NOK should continue to be a top performer out of the G10 currencies.


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