Neutral NOK positions despite recent rally
Norwegian investors have not acquired any major NOK positions during the past six months despite the recent strong performance of the NOK, suggesting the rally has been driven by foreign investors. Market participants however believe the NOK will be supported by a relatively favourable growth outlook for Norway and a continued high oil price. We find it particularly interesting that investors still regard Norges Bank as a positive factor considering the bank’s effort to prevent NOK strengthening and market participants’ modest rate expectations. This suggests that they view Norges Bank as more tolerant against NOK appreciation – we disagree. In an effort to prevent further NOK strength Norges Bank could raise and frontload FX purchases as verbal interventions have proved inefficient lately. Although Norway will continue to attract reserve managers diversification flows, in tradeweighted terms the NOK is now in line with our estimated long term fair value.
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SEB tech team