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Krone selloff embraced by Norges Bank governor promising more
[OSLO] Norway's central bank proved on Thursday it's more than happy to see investors dump its currency.
After cutting rates and signaling there's more easing to come, Governor Oeystein Olsen watched the Norwegian krone plunge as much as 1.8 per cent against the euro.
"The movements we have seen in the currency markets are not dramatic at all," Mr Olsen said in an interview in Oslo. "The reactions in the market make sense, based on our judgments of the economy." The bank cut its main rate to an historic low of 1 per cent on Thursday to avoid a recession in western Europe's biggest oil producer. It then surprised by signaling another cut may come as soon as September. As policy makers struggle to adjust to last year's plunge in the price of oil, the central bank is trying to ensure that a strong krone doesn't add to exporters' misery.
"We should be, and we seek to be, cool and patient in regards to moves in the currency market," Mr Olsen said.
He in December unexpectedly delivered a quarter-point rate cut after crude dropped to about US$63 a barrel and signaled a 50 per cent chance for another reduction. While that sent the krone down to its lowest since 2009, the currency subsequently recovered. The krone is still down more than 20 per cent against the dollar and 7 per cent versus the euro over the past year.
The central bank on Thursday cut its forecast for mainland economic growth. It also sees petroleum investments falling 15 per cent this year and 5 per cent next year. The bank had earlier predicted a 10 per cent decline for 2016.
Its projections signal there's a more than a 50 per cent chance of a cut at its next meeting on Sept 24.