NOK: Norges Bank Maintains Daily Purchases at NOK1bn, Fueling Speculation

NOK: Norges Bank may keep daily purchases at NOK1bn

Norges Bank is due to announce the size of daily FX purchases for September today, and despite lingering expectations of some market participants that FX buying would be scaled down, we expect it to be kept at one billion NOK. That remains a consistent figure with the most recent government estimates for petroleum revenues.

The continuation of NOK selling by Norges Bank is seen by some as a hindrance to the recovery potential of the krone, although the deep undervaluation and dependence on external factors suggest it plays a rather secondary role. Still, we could see some NOK weakness today as some expectations for a trim in FX purchases are unmet.

We continue to like the chances of a NOK rebound. EUR/NOK struggled to break below 11.50 yesterday, with some support also coming from a strong euro, but an environment that sees a bullish US yield curve steepening should see high-beta commodity currencies like NOK perform better than the EUR. We still expect to see EUR/NOK trade close to the 11.00 gauge by the end of this year.