Saturday, August 06, 2011

Why the Norwegian Krone is Set to Rally as a Safe Haven Currency

Why is the Norwegian krone the forgotten safe haven?

Big hat tip to Dr. Evil, who sent over this idea, pointing out that while investors are flocking to gold and the Swiss franc as safe havens, the Norwegian krone is not getting much love from European currency traders:
Norweigian Krone price chart year to date versus euro dollar swiss franc
The NOK, while up against the dollar YTD, has lagged the CHF, especially of late...and is only even with the EUR.
(Source: Google Finance)
One of our favorite currency analysts, Chuck Butler, concurs with Dr. Evil - last Monday, he wrote:
The Norwegian Krone slumped in early morning trading after the home grown terrorist attacks. Apparently the same sick person was responsible for both the bombing and shooting rampage which rocked the northern European nation. The stories of the survivors of the shooting rampage were chilling, and my thoughts and prayers certainly go out to all of those affected.

The Norwegian krone has long been a favorite of the desk, and I would look at any sell-off as an excellent buying opportunity. These attacks will not have any lasting impact on the government or economy of Norway, both of which are very strong and stable. Norway has excellent fundamentals backing its currency, and should be seen as another ‘safe haven’ in the volatile global markets.
Source: The Daily Pfennig

The Norges Bank currently has rates at 2.25%, and there are expectations that there will be more rate hikes later in the year, and into the future.

Norges Bank rate projections
Projections for the key policy rate (Source: Norges Bank).
The NOK sure looks like an interesting currency, given Norway's massive oil reserves, their government's responsible finances, and longer term demographic trends that look pretty favorable...especially by European standards.

Without an advanced trading account, the best way for an armchair investor to get exposure to the Norwegian Krone is to open an account with EverBank (as there are no ETFs or futures contracts available, at least that I was able to find, at this time).

Again, hat tip to Dr. Evil for important contributions to this piece.

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