The Norwegian Krone and the Coronavirus Effect
How is the current market impacting NOK?
As the coronavirus spreads, its effect on businesses across the world continues to amplify, especially on the tourist and travel industries. Equity and bond markets have experienced globally a prolonged sell-off over the last weeks. In parallel, Saudi Arabia has started an aggressive price war, after Russia earlier this year did not agree to restrict oil production. Whilst the oil demand collapses, Saudi Arabia has announced that it can increase production.
The Norwegian Krone (NOK) has depreciated sharply due to both the uncertainty associated with the coronavirus and oil price pressures. NOK trades primarily as a proxy to risk-aversion and oil prices. We expect the first factor to remain challenging for a month and then improve somewhat. Measures taken to reduce the spreading of the coronavirus together with the implications of the Russia-Saudi Arabia price war may keep oil prices low for an extended period of time.