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:

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.

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.

Australia Caught Sandbagging Their Currency

Nice scoop on the Australian dollar from our favorite currency analyst, Everbank's Chuck Butler:

And under the heading of "dirty float"... The Reserve Bank of Australia (RBA) is reported to have sold the most A$'s in the month of May, since February 2004! Now, go back to May and recall the move in A$'s... The currency gained almost 10% in the month... So, the A$ would have gained even more if the RBA had not sold A$1.4 Billion A$'s in the month! I personally think the RBA was just trying to smooth out the trading the A$, which given this information would have been moving up the charts with a bullet in May!

I don't think the RBA would get involved if the move was a slow, general appreciation of the currency... So, I don't look for future intervention to keep the A$ from gaining the ground I believe it will gain rest of this year, as inflation fears grow stronger and stronger...

Chuck said it - these types of inverventions never last - at the end of the day, fundamentals always win out.

Based on this info, I went long the Aussie dollar once again yesterday morning (I had closed my position on Monday, on fear the US dollar was due to rally).

Those sandbaggin' sons of bitches won't get away with this!

Also let me make a quick plug for Chuck's company - they offer bank accounts and CD's denominated in foreign currencies. So if you're really hot to trot on the Aussie, you could open up a CD denominated in A$, and earn interest to boot, while the A$ appreciates - potentially a sweet dea. Here's the link to learn more.

Related reading: Australia Avoids a Recession...For Now

Is Australia Turning Around?

More good news for Australia's economy - and the Australian dollar.

This builds upon our review yesterday of the Australian dollar's attractive prospects. The A$ is up $0.112 as I write, currently sitting at $0.7163.

From Everbank's Chuck Butler:

Down Under... Australia saw Consumer Confidence rebound for the first time this year... Here's the skinny... The Westpac-Melbourne Institute index of consumer sentiment rose 8.3 per cent to 92.7 points, from 85.6 points in March.

However, the index remains below 100 points, signaling pessimists are outweighing optimists, for the 15th month in a row.

Westpac chief economist Bill Evans said the result was "surprisingly strong" and followed a month of more positive economic news and a rise in the Australian dollar exchange rate and the stock market.

Just another brick in the wall... All in all, it's just another, brick in the wall... OK, what am I talking about here? I'm just infusing some Pink Floyd into my recent thoughts that Australia "may" be turning the corner... I also received a note from a reader that was traveling in Australia. The reader mentioned that they are not seeing the financial panic there... So... Some news from a correspondent on the road!